Examining the Advantages and Disadvantages of Holding Two Retirement Accounts: 401(k)s and IRAs - A WSJ Your Money Briefing

Having both a 401(k) and an IRA can boost your annual retirement contributions by 30%. WSJ contributor Michael Pollock joins host J.R. Whalen to discuss what savers should know about each type of account. 0:00 401(k) vs. IRA 1:46 Advantages of having two retirement accounts 2:43 Disadvantages of having two retirement accounts 3:13 Roth IRAs and roth 401(k)s 5:24 Other retirement plans Your Money Briefing WSJ's personal-finance podcast features the news that affects your money and what you do with it, breaking down complicated money questions from spending and saving to investing and taxes. For more episodes of WSJ's Your Money Briefing: #401K #IRA #WSJ...(read more)

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In today's economy, saving for retirement is more important than ever. Many workers have the choice of investing in a 401(k) or an individual retirement account (IRA), but is it a good idea to have both? Let's explore the pros and cons of having two retirement accounts. Pros: 1. Diversification: By having both a 401(k) and an IRA, you’re diversifying your retirement accounts. A 401(k) plan is offered by your employer, and the contributions are usually tax-deferred, meaning that you won't pay taxes until you withdraw the money. On the other hand, an IRA is individual and can be opened by anyone, regardless of employment status. IRA contributions can be tax-deductible, and you have more investment options. 2. Higher contribution limits: By having both retirement accounts, you can take advantage of higher contribution limits. In 2021, the annual contribution limit for a 401(k) is $19,500, while for an IRA, the limit is $6,000. If you are over 50, you can make catch-up contributions of up to $6,500 for a 401(k) and $1,000 for an IRA. 3. Flexibility: When it comes time to withdraw money from your retirement accounts, having both a 401(k) and an IRA gives you more flexibility. You can withdraw from your 401(k) plan when you retire or leave your job, but there are penalties if you withdraw before age 59 1/2. With an IRA, you can start withdrawals at age 59 1/2 without penalty. Cons: 1. Fees: Having two retirement accounts can mean double the fees you'll need to pay. Some employers may charge a fee for participating in their 401(k) plan, while an IRA may have management fees. These fees can eat into your earnings over time, so make sure you understand the fees associated with each account. 2. Complexity: Managing two retirement accounts can be complex. You'll need to make sure you're keeping track of your contributions, investments, and fees for both accounts. This can take time and effort, and there's a risk of making mistakes. 3. Required Minimum Distributions (RMDs): When you reach age 72, you'll be required to take annual RMDs from your retirement accounts. This can be a hassle if you have two accounts, as you'll need to calculate the RMD for each account. In conclusion, having both a 401(k) and an IRA can be a good idea, as long as you understand the pros and cons. Make sure you're aware of the fees associated with each account, and be prepared to manage the complexity of having two accounts. Ultimately, having both retirement accounts can give you more flexibility and higher contribution limits, which can help ensure a comfortable retirement. https://inflationprotection.org/examining-the-advantages-and-disadvantages-of-holding-two-retirement-accounts-401ks-and-iras-a-wsj-your-money-briefing/?feed_id=106688&_unique_id=64863d52a0b03 #Inflation #Retirement #GoldIRA #Wealth #Investing #401k #401kaccount #annualretirementcontributions #compoundinterest #employeeretirement #EmployeeRetirementIncomeSecurityAct #employerretirementmatching #financialnews #investing #Investments #ira #IRS #personalfinance #pfin #pretaxbasis #prosandcons #Retirement #retirementaccounts #retirementplanning #retirementsavings #roth401kvsrothira #RothIRA #stockmarket #taxes #TraditionalIRAs #tworetirementaccounts #wsj #yourmoneybriefing #TraditionalIRA #401k #401kaccount #annualretirementcontributions #compoundinterest #employeeretirement #EmployeeRetirementIncomeSecurityAct #employerretirementmatching #financialnews #investing #Investments #ira #IRS #personalfinance #pfin #pretaxbasis #prosandcons #Retirement #retirementaccounts #retirementplanning #retirementsavings #roth401kvsrothira #RothIRA #stockmarket #taxes #TraditionalIRAs #tworetirementaccounts #wsj #yourmoneybriefing