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Initials and Numbers

Updated: Feb 14


You will retire one day. Either you will be forced out or voluntarily retire. I am just hoping when the day come you have money in your retirement accounts. So let’s briefly discuss these initials and numbers. What is an IRA, a Roth IRA, 401k, 403b, Roth 401k, or Roth 403b? These are the primary vehicles used to put away money into a tax sheltered retirement account. Now these are just designations to shelter your money from taxes. They are not in themselves an investment products. Think of them as “blanket” to shelter your money form taxes.

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  1. An IRA is an individual retirement account. In 2020 you can contribute up to $6,000 per spouse regardless if one spouse works or not. If you are 50 years old or older you can contribute $7,000 per spouse. The advantages of the IRA is that while you are contributing it lowers your taxable income. For example if you salary is $100k and you contribute $12k for you and your spouse then your taxable income is $88k. The money in the IRA then grows tax free. However, when you start making withdrawals you pay taxes on that money.

  2. The better of the two IRA’s is the Roth IRA. Although the Roth IRA is invested with after-tax money, it grows tax free and you can withdraw it tax free. That is a big deal, and here is why. If you make $100k and contribute $12k you are still taxed on $100k for that year. The Roth doesn’t allow you to deduct your contribution. However, the money grows tax free and you get to take it out tax free. Since we are projected to have million upon retirement you will be at a higher tax bracket. You don’t want to pay taxes on millions of dollars. It is better to pay taxes on your salary now then later. Roth is the way to go.


Tomorrow we will write more about the other accounts. Needless to say, saving money for your retirement is critical, and the best way to do it is in tax sheltered accounts. We will explain the advantages of the other accounts tomorrow. Here is a question.


Do you have money set aside in one of these types of retirement accounts? Do you understand them?


If not you should, if you want to retire with enough money.


To be continued… here


If you have questions don’t hesitate to ask here. Take charge of your money!


Your biggest cheerleader on social media,


Gio Marin


P.S. Day 323 please pray for the 7.2 million goal for 2020

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