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I was recently at Skimm HQs conducting a workshop and I was asked “Which investment account should I open?” This is such a great question and one I am asked often.
In an ideal world, everyone would be investing in a reliable plan to start saving the maximum amount of money for retirement. According to a Forbes survey, 71% of millennials are saving money for retirement either outside of the work or in a workplace plan.
Despite their savings, Millennials are a bit more conservative in their strategy compared to past generations.*
Watch this video to learn the difference between a 401K and an IRA. We’ll discuss risk tolerance and more in an upcoming blog!
401(K)
If you are working in a company, you will likely be offered some sort of retirement plan known as 401(k). If that is available to you, this is where you should start your investing strategy. The reason being, your company might match a percentage of your contribution. That is almost like getting free money. For example, your company might match up to 6% or up to 100% of your contribution. The goal would be to contribute at least the amount needed to get the full employer match.
IRA
If you are self-employed or your company doesn’t offer a 401(k), then you can open an individual retirement account (IRA). You can open an IRA at any financial institution that offers an IRA account. It’s as easy as 1-2-3.
1. Open an account
2. Add money into that account
3. Invest the money once it’s into the account
Depending on your job situation, and what’s available to you, you can decide between a 401(k) or IRA retirement plan. Once you decide, you can start investing for your retirement goal.
Bonus Tip
Get started now and make it automatic. Once you open an account, make automatic monthly contributions so you don’t have to rely on will power to make it happen.
After you’ve watched the video, I want to know: Which one is a better fit for you? 401K or IRA?
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*Source: https://www.forbes.com/sites/andreacoombes/2018/03/13/millennials-are-good-at-saving-but-investing-not-so-much/#6c0584ae7266
