401k & IRA Differences

Video Transcript

"This is financial Advisor, Patrick Munro talking about which is better, 401k or IRA. Actually, it's a misnomer because both of those alphabet soup of retirement planning, 401k and IRA are achieving the same goal. In fact, there are other items called 403b's, 457 deferred comp plans, anything with numbers or letters really means a tax qualified plan that is recognized by the government which allows the tax payer to put money away for retirement. And when they do that, they don't have to pay taxes on the money. It's a great way to save. There's a not a one better than the other so to speak. They're in fact, the best differentiation is that a 401k is something that an individual has while they're still working. And what happens is when they quite working, they end up funding a private IRA which stands for Individual Retirement Account. Sometimes people will move these accounts around between vendors. What that's called is a rollover and you're able to do that at your will as long as you don't touch the money and move it from one custodian to another, that's a non-taxable event. So it's great to have a 401k, it's great to have an IRA. Neither is better than the other and as much money as you can possibly save in a tax offered environment, the better it will be for your retirement. This is Financial Adviser, Patrick Munro, talking about the benefits of a 401k versus an IRA."