For many people, the word “retirement” immediately brings one account to mind: the 401(k). But here’s the truth—your 401(k) isn’t the only way to build a retirement income strategy. What if you don’t have access to one through your employer? Or what if you want to save more than what’s matched? Even better—what if you’re looking for a way to guarantee lifetime income?
Let’s explore three other options that may play a role in your financial future.
Traditional IRA
Think of a Traditional IRA as a personal retirement account that offers a tax break up front. Depending on your circumstances, you may be able to deduct your contributions from your taxable income. For couples, this can be even more powerful—each spouse can have their own IRA, essentially doubling the household’s potential contributions and deferring taxes until retirement.
Roth IRA
The Roth IRA flips the tax advantage around: instead of deferring taxes, you pay them now, and in exchange, qualified withdrawals later are tax-free. That means both your contributions and the growth on those contributions can be taken out without tax after age 59½, provided the account has been open at least five years. Even more flexible, contributions (but not earnings) can be withdrawn anytime without penalty. And unlike some other retirement accounts, there are no mandatory withdrawals, allowing the Roth to keep working for you well into the future.
Annuities
Annuities are different from IRAs—they’re contracts with an insurance company designed to provide income for life. This option can protect you from the risk of outliving your savings and, depending on the type, may offer protection from market downturns. For some retirees, an annuity provides confidence by guaranteeing a steady stream of income no matter what the markets are doing.
Bringing It All Together
Retirement income planning isn’t one-size-fits-all. The right mix of accounts depends on your unique situation: your goals, your risk tolerance, and the lifestyle you envision for retirement.
So, here’s the question: if your 401(k) isn’t the only tool available, how might these other options fit into your broader plan? Could combining them create more flexibility, stability, and confidence in your retirement years?
If you’d like to explore what mix of retirement options makes sense for you, consider scheduling a complimentary meeting to discuss your personal goals and create a strategy that’s tailored to your future.
Annuities are long-term insurance contracts, and there is a surrender charge imposed generally during the first 5 to 7 years that you own the annuity contract. Withdrawals prior to age 59-1/2 may result in a 10% IRS tax penalty, in addition to any ordinary income tax. Any guarantees of the annuity are backed by the financial strength of the underlying insurance company. For more complete information about your 401(k) investment options, call your company’s plan administrator or your financial professional for a prospectus. The prospectuses contain details on investment objectives, risks, fees, and expenses, as well as other information about your plan’s investment options, which you should carefully consider. Please read the prospectuses thoroughly before sending money. Roth accounts require the owner to be 59.5 years old and have had the account open for 5 years to take penalty-free withdrawals. Converting an employer plan account to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences, including (but not limited to) a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.
This information is being provided only as a general source of information and is not intended to be the primary basis for investment decisions. It should not be construed as advice designed to meet the particular needs of an individual situation. Please seek the guidance of a financial professional regarding your particular financial concerns. Consult with your tax advisor or attorney regarding specific tax issues. We do not provide tax or legal advice or services. Always consult with qualified tax and legal advisors concerning your own circumstances.
