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Which IRA is Right for You?

What is the best retirement savings plan? That is a question I am asked all the time. There are lots of people contributing to 401k’s and IRAs and some are doing very well with it, while others have almost lost everything because they did not invest in the right tools for retirement planning. Let me share with you what I believe to be the best investment tool out there for retirement savings.

When I was younger I had no idea what retirement planning was all about. Then, I came across the Internet. Looking back, that is where I started to learn about retirement planning. I have learned that you can set any goal you want in your retirement planning, since there are lots of tools available for retirement planning. What I have found is that the best retirement planning tools are the ones you will use. I would look for these tools first before investing in anything else.

The first tool for retirement planning, I would look at would be a calculator. There are lots of financial calculators that you can use for retirement planning. I recommend looking for one that allows you to input a specific number of years and how much money you have saved up and then compare that with your annual income. This should give you an idea if your retirement savings goals are reachable or not. Once you find a good financial calculator that fits your needs, you can plug in the information and see what your numbers are. It should tell you exactly where you stand per year financially.

Another tool for retirement savings, I would look into is a retirement age calculator. There are lots of great retirement age calculators out there and most of them are free. This will give you a very good idea if you are reaching your retirement age and what your final expense will be.

Another important tool for retirement savings, I would also look into would be a calculator that allows you to plug in certain numbers in and then gives you your yearly cost for living. Some calculators do not allow you to do this. Basically, you will want to know what your tax year is and what the last five yearly contributions limits are for your retirement account. Knowing these two pieces of information will help you determine what your maximum contribution limits are. You will also want to know what your annual income tax rate is in your tax year and your contribution limits. Knowing these two pieces of information will help you reach your retirement account goals.

A final piece of important information I would look into is how best to reach your retirement savings goals through investing. In general, the best way to go about doing this is to invest in either a Roth IRA or a traditional IRA. There are several factors that determine which one is the best. Two major factors in determining the best IRA are whether you are covered by a group health insurance plan and whether your employer offers a cafeteria plan with flexible spending accounts.

If you have a cafeteria plan and are covered by it, your contributions are split among all of the people in your family, which means that they are not tax-deductible to the employer. The Roth IRA has a level plan where you can invest in anything you like and as long as you are under age 50, you are allowed to invest in funds as high as a thousand dollars per IRA. Traditional IRAs are much more strict when it comes to retirement savings and investing options. The Roth allows you to invest only in funds that are deemed “qualified”. So if you want to invest in a hundred thousand dollar mutual fund and it is not qualified, you cannot.

Another option you have when deciding on retirement savings is whether you will make contributions electronically or by paper. If you are planning on filing joint returns, electronic contributions may be the best choice for you. Electronic contributions require no paper work, which makes it easy to file and less prone to errors. Paper contributions, although tax-deductible, also tend to take longer to reach retirement, which may lead some people to save in a traditional manner and then dip into the investments over time.