Only 44% of Black Americans have a retirement account. Even then, it typically amounts to around $20k or less. Investing in retirement funds is an optimal way to start saving now. However, which account is better: a 401k or an IRA?
A 401k is a retirement investment account offered by most employers. A preset and pre-taxed amount is automatically taken from an employee's paycheck and deposited into an investment account. The annual maximum contribution account is $22,500. However, many companies offer a percentage match, allowing for higher returns.
An Individual Retirement Account (IRA) is another way to save for retirement. Three types of IRA exist: Traditional, Roth, and Employee Pension. The maximum annual contribution amount is $6,000. However, there is no employee match, and the type of account determines whether the funds are pre- or post-tax dollars.
Both 401k and IRA accounts are robust options to raise the amount of retirement savings in our community. Knowing their differences can help you decide which will work best for you and can set you and future generations up financially.