What is the difference between Roth IRA, 401k, and Life Insurance?
Elizabeth Hicks
?? Forbes Under 30 Scholar | ???? Harvard VVM | ?? Leadership Miami Class 44
Hello there! ??
As a licensed life insurance agent, I often get asked questions like : ?
?? "What is a Roth IRA? What is life insurance? Do I need that? How do I max out my 401k?"
If you've thought about any of these things before, look no further. Let me de-mystify some of these topics. ??
A Roth IRA is a retirement savings account that allows you to withdraw money tax-free. That's really the key in financial planning. Is your money that you are saving & accumulating going to be heavily taxed when you need it? ??
A 401k plan is an employer retirement plan that allows employees to contribute money to a retirement account in a tax-advantaged way. There is an annual limit of your salary that you can invest. ??
Life Insurance policies such as Cash Value Life Insurance allow an individual to have control over their financial legacy. Life Insurance has a great tax advantage and the reason why many people use a cash value life policy as an investment. You can invest after tax dollars into the policy and withdraw a significant amount of the cash value tax-free through a combination of withdrawals and loans. ?????????????
So what do you need to leave a financial legacy for your children/loved ones and also live comfortably in retirement? ??
The difference between Life Insurance and a Roth IRA is that with an Roth IRA, your beneficiaries will still be subject to estate taxes and essentially lose out on the money you have accumulated in your life by planning for the future with your Roth. With Cash Value Whole Life policies, there is no income or estate taxes to be paid, and your beneficiaries receive a benefit should something happen to you. ??
Diversification is key here and I would recommend looking into all of these. If your employer provides a 401k, I would absolutely recommend maxing that out. If not, consider a Roth IRA and life insurance. ??
For recommendations on where to start, send me a DM. ??
Love and happiness,
Elizabeth Hicks ??
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CPA, founder of ATHENA CPAs & Advisors ?? boy mom ???? and bodybuilding enthusiast ???♀? I help entrepreneurs gain financial clarity, reduce tax stress, and keep more of what they earn
3 年Great article Elizabeth! Specially when people our age see retirement so far along the line ??