One of the most exciting investment tips we’ve heard in recent years has to do with the 401(k) retirement savings.

According to the National Millionaire Study, eight in 10 millionaires say their 401(k) is the best way to build an investment and to build wealth in retirement. But do you know why?

Here’s why a traditional 401(k) is a great place to start your retirement savings:

-If your employer matches your contributions (and most do), you’ll instantly get a 100% return on part of the money you invest in your 401(k). That’s free money.

-Tax-deferred growth means your money grows faster.

-You can invest up to $19,500 per year (and your spouse can also invest that amount). If you’re 50 or older, the contribution limit increases to $26,000 per year to help you catch up.

But 401(k)s do have their flaws: first, you have a limited number of mutual funds to choose from, which can keep you from investing in high-performing funds on the market.

Secondly, your traditional 401(k) will give you an advantage when saving today. However, you’ll be taxed on your money when making a withdrawal later in retirement.

For this reason, usually it’s suggested to utilize another retirement savings account in addition to your traditional 401(k).

That’s where Roth IRA’s come into play.

-Tax-free growth and withdrawals-You’ll be able to use your money without getting taxed on your future withdrawals, which is great considering tax rates could go higher in the future.

-Flexibility-With a Roth IRA, you’re able to work with an investing pro to pick from thousands of mutual funds to invest in.

Ultimately, investing in two retirement accounts is the smart thing to do.

It’s not complicated. All you have to do is a little math or have your financial advisor adequately distribute your funds for a successful retirement.

Schedule a 10 minute call with us to review your 401k. We will help you create a plan to retire.