Retirement Planning: Frequently Asked Questions

We get a lot of questions about investments and retirement plans. While everyone has different needs and goals, here are a few common questions we receive, and some basics to consider.

When should I start investing?

Every person is different, but the general guideline is to start when you have the means to do so. Some people start with their employer’s retirement plan, such as a 401(k) or 403(b) plan, especially if they offer a match on what you contribute. If your employer doesn’t offer a retirement plan, consider investing in personal Individual Retirement Accounts (IRAs), like a Traditional IRA or Roth IRA.

What’s better: a 401(k) or an IRA?

Both can be helpful to reach your retirement goals, but there are differences to consider for each. For example, while a 401(k) offers higher maximum contribution levels, you can only invest in one if your employer offers it. For 2023, your maximum contribution to a 401(k) plan is up to $30,000, while an IRA limit is up to $7,500, depending on your age.

One thing to note is that if you invest in a 401(k), you may also invest in a personal IRA. You may want to discuss with your advisor which one, or both, is the best option for you depending on your situation.

When can I start withdrawing from a retirement account without penalty?

With a 401(k), you can start to withdraw without penalty as early as age 55, but if you’re still working, your employer may not allow you to withdraw funds. You’ll also owe federal and state taxes. Any withdrawals before your company’s stated retirement age are subject to a 10% penalty unless you qualify for an exception.

With a Traditional IRA, you can start withdrawing at 59½ without penalty, although you’ll owe federal and state taxes. Early withdrawals may be subject to an additional 10% tax.

If you have Roth investments, you may be able to avoid taxes and penalties depending on your age and situation.

Can I take an early withdrawal from my retirement account without penalty?

Yes, you can. Here are some potential qualifying reasons:

• Higher education expenses
• First-time home purchase
• Certain medical expenses
• Financial hardships

We hope these answers provide you with more clarity around your retirement planning. If you have additional questions, call or text us at 458-777-4458.

Information in this material is for general information only and not intended as investment, tax, or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.  

Email me your questions at info@financialfreedomwmg.com or call 541-574-6464.  You can also post your question on our Facebook page: https://www.facebook.com/FinancialFreedomWealthManagementGroup or find us on Instagram @financialfreedomwmg.