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February 28 2011 • by Andrea Rodrigues • Budgeting, Retirement

Today’s Money tip offers insight into 401Ks and IRAs. First, what’s the difference? A 401K is a pre-tax investment account that is sponsored by an employer and typically includes an employer match of your contribution. If your employer offers a 401K, you should always contribute at least the minimum required to meet the match. After all it’s free money. If this isn’t an option for you, an Individual Retirement Account, or IRA, might be a good choice. Like a 401K, the money you put into a Traditional IRA can help you lower your taxable income because your contributions may be eligible for tax-deductions, depending on your individual situation. Another option to consider is a Roth IRA. The money you invest in a Roth is post-tax, meaning you will have already paid taxes on it but you won’t be taxed on the gains when you withdraw for retirement. Everyone’s tax situation is different so it’s important to check with your tax professional before making any decisions.