A recent study found that 74% of part-time workers are using a regular bank account for their retirement savings. The problem with this is, first, they are not receiving the tax advantages that come with other accounts, such as a 401(k), IRA or HSA. A second issue is that bank accounts offer low returns in comparison to an S&P 500 index fund or even a high-yield savings account. A final concern is that money in the bank is more likely to be spent on short-term needs than saved for retirement.
Key Takeaways:
- Studies have shown that many people are using the wrong accounts to save for their retirement.
- Many people are keeping their savings in a regular bank account rather than using a special tax investment account.
- The value of using an IRA or an HSA is that you are able to get pre-tax contributions as well as tax-free withdrawals.
“Tax-advantaged retirement plans, such as 401(k)s, IRAs, and HSAs, are a far better choice for most people than investing for retirement using a bank account.”
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