Save using an IRA or Employer Retirement Plan

By Rhonda Chavez Payne, Wealth Manager, Partner

Using an IRA or employer retirement plan is a smart way to save! In addition to saving, there are tax advantages to using an IRA or employer retirement plan. A deferred IRA or employer retirement plan grows free from the clutches of Uncle Sam. That is, the income from interest, dividends and capital gains can compound each year without taxes nipping away at it. Also, you can escape taxes on the amount you contribute into the IRA or plan each year (income limits apply). Roth IRAs and 401ks allow you to escape future taxes on the money you withdraw later during your retirement (there are also income limits on Roth contributions). Your unique financial situation should be considered so consult a financial advisor to explore whether deferred retirement saving or Roth retirement saving is better for you.

Employer retirement plans allow individuals to save more for retirement and often companies offer to match a portion of the money their employees contribute to the plan. This perk can help company owners save for themselves as well as retain satisfied employees. There are many types of employer-sponsored retirement plans available; consult a financial advisor to help you determine which type is best for your company.

How much can a person save using an IRA or employer retirement plan?

IRAs. For tax year 2021, a working individual can contribute up to $6,000 to all their IRAs combined. If you are age 50 or older, you can also make a $1,000 annual “catch-up” contribution. Most investment firms offer a monthly contribution to simplify the saving process, and that avoids you having save up a lump contribution amount each year.

Employer-sponsored retirement plans. Plans such as 401(k)s and 403(b)s have a $19,500 contribution limit in 2021; individuals aged 50 and older can contribute an extra $6,500 each year as a “catch-up” contribution. (Section 403(b) and 457(b) plans may also provide special catch-up opportunities.) This is in addition to any employer matching contribution that is offered.

There is much information available on the power of compounding, and how starting to save early with an IRA or employer retirement plan can be of great benefit to you.

To discuss more on this subject, contact a financial advisor at Stratos Wealth Partners at 928.460.5520 or

Securities offered through LPL Financial , member FINRA/SIPC. Advice offered through Stratos Wealth Partners, a registered investment advisor and a separate entity from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and LPL Financial do not provide tax and legal advice or services. To determine which strategies or investments may be suitable for you, contact the appropriate qualified professional prior to making a decision.

Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.