Retirement Planning For Dummies

Chapter 4

Choosing the Right Account

IN THIS CHAPTER

Understanding the types of retirement accounts

Comparing the pros and cons of retirement accounts

Finding options for the self-employed

Questions are likely filling your head. “Where do I start?” “What’s a 401(k) or individual retirement account (IRA) anyway?” “What is the difference between a Roth IRA and a traditional ORA?” “Which one is better?” “What’s tax deferral and why does it matter?” “I’m self-employed, what retirement plans can I use?”

If you have questions like these, you’ve come to the right chapter. Here I show you the different types of retirement accounts along with their advantages and disadvantages. Choosing the right retirement account can help you reach your goals more quickly.

Retirement Planning in a Nutshell

All the retirement-planning mumbo-jumbo you hear is due to one word: taxes. In a world with no taxes (we can only dream), you wouldn’t need a 401(k), Roth IRA, or any other special retirement account with a funny name. You’d just put money in a brokerage account, accumulate enough to pay for your run rate (how much you spend), retire, and withdraw money as you need it.

But alas, we live in a world ...