Guiding the DiGregorio Group at Janney Montgomery Scott, Chris DiGregorio is a respected member of the retirement planning community. Among Chris DiGregorio’s areas of expertise at Janney are inter-generational wealth transfer and retirement income planning.
When approaching one’s retirement years, it makes sense to contribute as much as possible to traditional IRAs or 401(k) plans, rather than simply placing the money into a traditional brokerage or savings account.
For both traditional IRAs or 401(k) plans, the reason for this is because investment growth is tax-deferred and annual payments do not need to be made on gains as they occur. Instead, those gains can be reinvested in ways that increase the principal further. Taxes only come due on such accounts when withdrawals are taken. Contributions to a 401(k) are limited to $19,000 of pretax income in 2019. However, as a qualified employer-sponsored retirement plan, 401(k) plans may benefit from matching employer contributions.
The Roth IRA works in an opposite way. Contributions are made after taxes are taken out and the money in the account grow tax-free. This maximizes the amount ultimately received and is a judicious way of ensuring income throughout retirement.
