IRAs or Employer Plans: Which is Better for You?

There are two basic types of retirement plans:

  • Employer plans are retirement plans available to you through your job. Businesses often provide pensions or 401(k) plans. Employees of nonprofit groups have their own type of retirement plan: a 403(b) plan. Visit Retirement Benefits: Make the Most of Yours to learn more about these items.
  • Individual retirement accounts (IRAs) are retirement plans that you set up yourself. They come in two types: traditional IRAs and Roth IRAs. You can learn more about IRAs by visiting Making Your own Plan with IRAs.

Which is best? It depends. Some employers offer a match in their retirement plans. If you put money in your account, they will match your contribution—up to a certain amount. In general, if your employer offers a match, you should take advantage of it.

Focus first on contributing enough to receive your maximum employer’s match. After that, if you have more money to invest, you may wish to consider other options.

However, you might deem other factors more important to your decision, such as:

  • Investment flexibility. Some employer plans limit the way that you can invest your money. If you like the investment options available to you, you may wish to stick with your employer's plan. If you'd prefer to have other investment options, an IRA may be a more flexible route.
  • Tax deductions. If you need the tax break now, traditional IRAs can help you save money today. If the tax deduction isn't critical now, a Roth IRA can help you amass more savings for your future.

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