While an IRA may have a lower annual contribution limit (2017: $5,500; $6,500 age 50 or older) than a workplace-sponsored retirement plan, opening an IRA can provide an opportunity to help diversify your retirement assets. An IRA offers certain benefits that are generally not available in a 401(k), such as:
- Lower cost
- Larger spectrum of investment options
- Flexible options for penalty-free distributions prior to age 59½
- Roth IRA does not require distributions after age 70½
- Roth IRA offers “tax diversification” to help eliminate tax liability for a portion of retirement income
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