Do you know where the best places are to be saving for retirement?
Carl Carlson, CEO of Carlson Financial has some tips on how you can answer this question.
First, he said it is important to see if your work offers a retirement plan like a 401(k), 403(b), TSP, etc. and if so, will they match contributions that you put in? These workplace retirement plans are the best place to start because those matching contributions are free money; put in at least enough to get the entire match.
If someone is getting their company match but they could still save more Carlson's preference would be to max out a Roth IRA next if you’re able, the annual limit is $5,500. This will give you some tax-free money in retirement, plus if you ever do need to use the money before retirement, you can always withdraw what you’ve put in.
If you can still save more Carlson suggests going back to your employer plan. Most annuals limit is $18,500 or $24,500 if you are over 50 (unless it’s a SIMPLE). You might also see whether your employer offers matching contributions on a Health Savings Account (HSA), in which case you should contribute up to the match on that account. Those accounts can be used for medical expenses at anytime or retirement if you let it grow until age 65.
If you are a save-a-holic who maxes out your 401(k) and IRA your options become more limited, but a good account would be a taxable account, like an individual or a joint account, Carlson said.
You don’t quite get the tax benefits of retirement-specific accounts, but you do get a more favorable tax rate, the capital gains rate, and the best part is there is no limit on contributions, and no minimum age requirement to withdraw from it.