Retirement Income Planning Strategies

Traditional 401(k) plans are the most well-known type of retirement savings account, and for a good reason. This plan allows you to make pre-tax contributions to your account, which can then be used as a tax deduction.

Additionally, any money you save grows tax-deferred until you withdraw it in retirement. That means you won’t have to pay taxes on the money when you take it out of your account. The downside is that these accounts limit how much money you can contribute each year, and penalties may apply if you withdraw from it before reaching the age of 59 ½.

Roth 401(k) plans operate differently than traditional ones in that they are funded with after-tax dollars instead of pre-tax dollars. Although you don’t get an immediate tax break for contributing to this type of account, your earnings are tax-free when withdrawn in retirement.

Roth accounts have higher contribution limits than traditional plans and don’t come with early withdrawal penalties. However, this could also work against savers who don’t need their funds during retirement and would prefer the tax break offered by traditional plans. If you’re unsure whether a Roth 401(k) is a fit for you, the consultants at NEC Insurance can work with you to evaluate your options and determine the best approach for your particular situation.

SMAs offer investors more control over their investments than traditional or Roth 401(k) accounts. These accounts allow individuals to invest in specific stocks or mutual funds while taking advantage of the potential tax benefits offered by other retirement savings accounts. The downside is that these plans require larger minimum investments and may charge higher fees than other retirement accounts.

SDBAs provide a more hands-on investment approach since you can decide which stocks and funds to invest in without relying on a third-party financial advisor or institution for guidance. However, this type of account also carries greater risks due to its lack of diversification and sometimes high costs associated with trading individual securities and funds.