Update of "RetirementAccounts"

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Artifact ID: fefeb1f7e092ae77623e56cf8419a883128ed3ed0bca3834fdf4e91d237da27b
Page Name:RetirementAccounts
Date: 2021-05-19 19:57:47
Original User: zie
Parent: a526bcc07afc55c02595e9f8e2b6c9ff6b072f235c413e9d2be067629595f0b9 (diff)
Next ecaf0ac93e7e67148e02cf1ec37591bf9dbeaaebaceb916531c69a82c6aa2d40

Retirement accounts are the special tax-advantaged accounts meant for retirement that are generally always better than a taxable brokerage account, but not always.

Normally your employer just makes 1 type available to you, and you have little to no choice. Usually the choices you get are:

  1. pre-tax (traditional) or post-tax (ROTH) contributions

  2. 1 or maybe a few different vendors to choose from.

If you are self-employed or are otherwise responsible for your own retirement(for example 1099 workers), then you have more options available.

This article does a pretty good job of explaining the many varieties.

Generally speaking you can usually safely ignore most all the details and focus on pre-tax/post-tax and putting in as much as you can. The other details usually don't matter, and worst-case the details just mean you have to pay a bit more taxes, not the end of the world. The details usually only matter if you are approaching the max contribution limits(which are usually $19,500/yr).

You want pre-tax contributions if you think you will pay less taxes in retirement, and this is generally true for the vast majority of people, so pre-tax contributions are a great default.

You want post-tax contributions if you will pay the same or more taxes in retirement. This is usually only true for people with Pensions or people with LOTS of tax-advantaged account savings(over $2million USD) and huge RMD's.

That said, a ROTH-IRA is generally always available on top of whatever other retirement account you can get, and you should try to max that out if you can(2021 limit of $6k per year -- some additional ways exist to make this # effectively unlimited but are complicated and not always available, research "mega back-door roth" if you have loads of $$$'s).