If you're a new investor, you have several decisions to make. For example, you must determine where to invest. Ideally, you want an investment vehicle that allows your money to grow steadily over time. But is that a Roth IRA or a 401(k)? Here, we'll compare the two and help you determine which one best meets your needs.

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The best features of a Roth IRA

Each retirement plan has its own list of advantages. Here's what a Roth IRA has going for it.

• Tax-free withdrawals: With a Roth IRA, you make all contributions with after-tax dollars (in other words, on money you've already paid taxes on). Because a Roth is funded with after-tax dollars, you don't have to pay taxes on the money again when you make withdrawals in retirement. Not having to pay taxes when you're on a fixed budget is a real perk.
• Flexibility: While you would have to pay a penalty for withdrawing contributions (not earnings) from most retirement accounts before a certain age, the same is not true with a Roth IRA. You can withdraw contributions at any time without penalty.
• Investment options: When comparing the two, Roth IRAs typically offer a wider range of investment options than most employer-sponsored plans, such as 401(k)s.
• No required minimum distributions (RMDs): Unlike other types of retirement plans, Roth IRAs don't require you to take distributions. You can make withdrawals as needed. If you prefer, you can allow your savings to remain in the account and grow tax-free for even longer.

The best features of a 401(k)

• You can save more: 401(k) plans generally allow for higher annual contributions than Roth IRAs, allowing you to build your nest egg at a faster clip.
• Employer matching: Many employers offer to match a portion of your contribution each month, a move that can dramatically boost your savings.
• Lower taxes: Most 401(k) contributions are made with pre-tax dollars, meaning your contributions are deducted from your annual adjusted gross income (AGI). The ability to avoid taxes during your prime earning years is an advantage if you expect to earn more while you're working than in retirement.
• Automatic deductions: The fact that contributions are deducted directly from your paycheck makes it easier to save consistently.

The less attractive side of Roth IRAs

Few financial products can be called perfect. Here are some disadvantages associated with Roth IRAs.

• Contribution limits: You can contribute much less to a Roth IRA annually than to a 401(k). Let's say you're in your 40s and have an AGI under $150,000 (if you're single) or an AGI under $236,000 (if you're married, filing jointly). The most you can contribute to a Roth IRA this year is $7,000. If you are over 50, you can make an additional catch-up contribution of $1,000, for a total contribution of $8,000.
  
  By contrast, the 401(k) contribution limit for 2025 is $23,500. If you're aged 50 to 59 or 64 or older, you can pitch in an additional $7,500 in catch-up contributions. And beginning this year, if you're between 60 and 73, your catch-up contribution can be as much as $11,250. In short, a 401(k) allows you to contribute anywhere from $23,500 to $34,750, depending on your age.
• Income limits: If you're a high earner, you may be ineligible to contribute to a Roth IRA.
• Must wait for tax benefits: Since you're paying taxes on the funds before they're contributed, you don't receive an immediate tax benefit with a Roth IRA.

The less attractive side of 401(k)s

Again, it's tough to be perfect. Here's the downside of 401(k)s.

• Limited investment options: 401(k)s typically offer a limited selection of investment options compared to IRAs or brokerage accounts. Limited investment options mean less ability to diversify your portfolio.
• Sneaky fees and expenses: 401(k)s come with investment management fees and administrative costs that can eat into your returns over time. Worse, if you feel rushed to sign up for an employer-sponsored 401(k), you may not take the time needed to familiarize yourself with how much you're paying in fees and expenses.
• Withdrawal restrictions: It can be a challenge to access funds from a 401(k) in the event of an emergency. That's because withdrawals made before age 59 1/2 typically incur a 10% penalty in addition to income taxes at your ordinary tax rate.
• RMDs: Beginning at age 73 (or 75 if you were born in 1960 or later), you must begin taking RMDs from your 401(k), even if you don't need the funds to cover bills. It's at that time that you'll owe taxes on the amount withdrawn. While it's nice to get a tax break while contributing to a 401(k), the taxman eventually wants his piece of the pie.

The good news is this: Choosing between a Roth IRA and a 401(k) is not an all-or-nothing scenario. There's no rule saying you can't invest in both, and that may be precisely what you decide to do. In the meantime, how nice is it to know you have options?

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Required minimum distributions (RMDs) are the minimum amounts you must withdraw annually from certain retirement accounts, like traditional IRAs and 401(k)s. They may not be fun, but they are necessary.

For many retirees, RMDs begin at age 73. However, if you were born in 1960 or later, you have until age 75 to start RMD withdrawals. RMD guidelines are stringent and have changed over the years, making it no surprise that many of us make an RMD-related mistake from time to time.

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Here are some of the most common -- so you can hopefully avoid them.

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1. Missing the all-important deadline

Your first RMD deadline is April 1 of the year after you turn 73. So, if you're turning 73 this year, your first deadline is April 1, 2026. Subsequent RMDs must be taken care of by Dec. 31, each year.

2. Withdrawing the wrong amount

Withdrawing the wrong amount can end up being an expensive mistake. For example, if your annual RMD is $50,000 and you accidentally withdraw $40,000 instead, your withdrawal is $10,000 short. The IRS will impose a 25% excise tax on the amount not withdrawn (in this case, that would be $2,500). However, if you correct the mistake by withdrawing the required amount within two years, the IRS penalty drops to 10% ($1,000).

Note that there may be exceptions. Let's say your reason for failing to take an RMD was because you were seriously ill, a spouse died, or your house burned down, or your accountant (who normally takes care of the issue) fled the country. That may be considered a "reasonable error." If that's the case, file an IRS Form 5329 and request a waiver.

3. Overlooking tax implications

While an RMD sets the minimum amount of money you must withdraw, you can take more if needed. However, don't forget that RMDs count as taxable income. Before you decide for sure how much you're going to withdraw, make sure you know if it will knock you into a higher tax bracket. Use that information to deterine if you want to scale back on how much you're withdrawing, or move ahead.

4. Failing to consolidate accounts

If you have multiple retirement accounts, RMDs need to be calculated for each account separately. To calculate RMDs for each account, you'll need to:

• Determine the balance for each account as of Dec. 31 of the previous year.
• Divide that balance by the appropriate IRS life expectancy divisor (as published online).
• For IRAs, you can calculate each RMD separately but withdraw the total RMD from one or a combination of the IRAs.
• For 401(k)s and other defined contribution plans, you must take RMDs separately from each account.

5. Having insufficient funds

While you may have more than enough money in your accounts to cover your RMD, that doesn't mean each of those accounts can easily be liquidated or traded for in-kind. For example, non-publicly traded assets can take months to liquidate and could cause you to miss your RMD deadline.

If your account holds assets that can't be quickly turned to cash, make sure you have enough cash or other suitable assets to cover the RMD -- just in case.

While it would be a stretch to compare an RMD to driving a car, the two do have one thing in common: The better you understand the rules, the more likely you are to do things right. No matter how complicated RMDs may seem at first, the more practice you get, the easier it will become.

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If you're between the ages of 60 and 63 by the end of the year, you're part of a rarefied (but lucky) group. Beginning this year, Section 603 of the SECURE Act 2.0 allows you to supercharge your retirement accounts by contributing even more -- but only if you're between 60 and 63. Once you hit age 64, the party is over, and you're back to making "regular" catch-up contributions.

Here's how the optional catch-up opportunity works.

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Super catch-up

A super catch-up does not replace an ordinary catch-up. The opportunity to make super catch-ups may be new, but regular catch-up amounts have been around since 2001. As part of the Economic Growth and Tax Relief Reconciliation Act, Congress allowed people aged 50 and older to contribute more to their accounts, helping them reach their retirement savings goals.

These catch-up contributions were initially designed to circumvent established legal limits and limits imposed by individual retirement plans. For workers 50 and older, catch-up contributions have been helpful. After all, contributing an extra $7,500 (the maximum catch-up contribution to a 401(k), 403(b), and 457(b) plan can turbo-boost a retirement account.

Let's say someone doesn't start investing in a retirement plan until age 50. At that point, they peg out their 401(k) plan by contributing the full $23,500. With an average annual return of 7%, they have $590,432 in the account by the time they're 65. However, if they took advantage of the super catch-up between ages 60 and 63, they would have $693,381 by the end of their 65th year, over $100,000 more.

While the new super catch-up only applies to those aged 60, 61, 62, or 63, it is impressive. The following table offers a peek into how much more a person can invest for retirement during those crucial years.

Data source: IRS.

A detail worth noting

Although the table shows both workplace retirement plans and SIMPLE IRAs, certain employees may not be able to make catch-up opportunities even if they're 50 or older. Typically, it's up to the employer and/or plan regulations to determine whether catch-up contributions are permitted. If a retirement plan doesn't allow for standard catch-ups, the new super catch-up will also not be available. Your best bet is to check with your plan administrator to ensure the plan you're enrolled in does allow for catch-ups.

Given the state of the U.S. economy, it's natural to wonder how your retirement savings will stack up. The best anyone can do at this point is to stay the course and, if possible, add every dollar to the accounts designed to support you in old age.

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If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

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View the "Social Security secrets" »

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When you've already cut your retirement budget to the bone, you don't need anyone telling you to dig a little deeper. That's not what this article is about. Instead, we'll look at things you can do today to begin cutting costs. It's up to you to decide whether to tuck the savings away in an emergency savings account, invest it, or save it for something fun.

While some of these ideas may be familiar to you, hopefully there will be a few you haven't yet considered.

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Image source: Getty Images.

1. Embrace digital coupons and cashback apps

If your idea of couponing is spending hours at the kitchen table cutting coupons out of a newspaper circular, you're going to love the newer alternative. As the name suggests, digital coupons are redeemed digitally. There's nothing to cut and no paper coupons to lug around or sort through.

You can find money-saving coupons on retailers' websites, on social media, or by downloading an app to your smartphone. Here's a sample of some of the most popular digital coupon apps and what they can do for you:

• Honey: You can download the Honey app for either iOS or Android smartphones or add the Honey extension to your computer. Here's how it works: You shop online, and Honey automatically finds (and applies) the best coupon codes when you check out. Honey is a fan favorite due to its vast database that gives users access to coupons that may not be available elsewhere.
• Ibotta: Ibotta is a big player in cashback and is great for grocery shopping. First, you search for the deal on products or retailers you like, and once you find what you want, you add it to your list. After you've purchased items (either in-store or online), you submit your receipt directly through the app. If you have a store loyalty account, you can link it to Ibotta to automatically redeem eligible offers. As soon as your cashback balance reaches $20, you can transfer it to your bank, PayPal, or convert it to gift cards.
• Flipp: Another smartphone favorite is Flipp, and with good reason. It's a great money-saving tool, but nearly as important, it can save you valuable time. The Flipp app browses through digital flyers from more than 2,000 retailers to find the best deals near you on things you buy. With Flipp, there's a ton you can do with the touch of a button. For example, you can quickly find specific items or stores, or create a shopping list and let Flipp do the work by matching your items with deals. You can also clip digital coupons, which will be automatically added to a store loyalty card for use at checkout.

2. Take full advantage of memberships

If you have a membership to a big-box store like Sam's or Costco Wholesale, make sure to squeeze every last dollar from its benefits. For example, take advantage of low-cost optical care, office supplies, automotive work, and discounted auto insurance. If you're buying a new car, you may even be able to find a great deal by making the purchase through the store's auto purchasing program. Use pharmacy discounts and explore exclusive travel deals. Don't forget to check out specially priced tickets to local events.

If you want to make the most of your membership, consider getting together with a friend or family member and splitting the cost of bulk items. For example, neither of you may need a huge bag of lemons, but each of you could use half.

3. Negotiate monthly expenses

Many utility companies are willing to work with you on price. Give your utility providers a call to let them know you're a retiree and would like to remain a customer but need a price break. Here are some of the services frequently open to discounts:

• Cell and home phone
• Cable and satellite TV
• Home security
• Internet
• Some electric and natural gas companies

When a utility provider knows you have options, it's more likely to find a way to give you a discount. After all, it would rather provide a discount than lose a good customer. Negotiating consists of three steps:

1. Research other providers in your area to see if your current company is charging you too much.
2. Be polite and clearly explain your needs. Ask about discounts and promotions.
3. Be ready to switch. If you're unhappy with how negotiations turn out, make sure you can get a better deal elsewhere and make the switch.

4. Take advantage of designated senior shopping times

Several major retailers offer discount shopping times for seniors, such as:

• Target
• Walmart
• Aldi
• Dollar General
• BJ's Wholesale Club
• Safeway, Albertsons, and Vons
• HyVee
• Fred Meyer
• Piggly Wiggly
• Fresh Market
• Kohl's
• Michaels
• TJ Maxx
• Ross Dress for Less

Whether you save 10% or 20%, that's money in your pocket.

5. Don't be shy about using community resources when you need them

If you have trouble covering the cost of rent, making home repairs, or buying the nutritional food you need, look to nonprofits and community-based organizations in your area. If you're unsure where to start, contact 211.org, a service that connects people to essential community resources and services. Accessing 211 is easy: Simply dial 211, chat with a representative online, or browse local resources on the 211.org website.

If you're interested in money-saving strategies, it can be fun to add new ones to your list.

The $22,924 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

Dana George has positions in Target and Walmart. The Motley Fool has positions in and recommends Costco Wholesale, PayPal, TJX Companies, Target, and Walmart. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short June 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.

There's nothing easy about losing someone you care about, regardless of their relationship to you. Not only do you count on the important people in your life for emotional support, but you may also depend on them for financial support.

If you've lost someone and you're eligible for Social Security survivor benefits based on their work record, it's important to ensure you're receiving the support you deserve.

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The following questions are designed to help you determine if you're getting everything you're eligible for from your Social Security survivor benefits.

Image source: Getty Images.

Who's eligible?

According to the Social Security Administration (SSA), the following may be eligible for benefits after the loss of a loved one:

Spouses and ex-spouses

It's possible you're eligible if:

• You're 60 or older or 50 to 59 with a disability, and
• You were married for at least nine months before your spouse passed away, and
• You didn't remarry before age 60 (age 50 if you're living with a disability)
• You're a surviving spouse (of any age) who's caring for the child of the deceased, that child has a disability and is receiving Social Security benefits
• You're an ex-spouse who was married to the deceased for at least 10 years

Exception: The SSA reports that a person may be eligible for Social Security survivor benefits regardless of age or how long they were married. The example given is of a person who is caring for the child of the deceased.

Children

The child of someone who's died could be eligible if they're unmarried and are:

• Age 17 and younger, or
• Ages 18 to 19 and in school (K-12) full-time, or
• Any age if they developed a disability at age 21 or younger

Exception: Under specific circumstances, the SSA also pays benefits to married children, stepchildren, adopted children, grandchildren, and step-grandchildren.

Adult children with a disability

• An adult child with a disability that began before their 22nd birthday may be eligible for benefits.

Dependent parents

• Parents aged 62 or older who were financially supported by their child who died might be eligible.

As you can see, rules regarding who's eligible for benefits aren't written in stone, and the SSA looks at applications on a case-by-case basis. If you or someone you care about may be eligible for survivor benefits, it's important to apply.

How long can a caretaker continue to receive benefits?

If you're caring for the child or children of a deceased spouse, you're eligible to receive benefits to care for them until they reach age 16. At 16, the children will receive benefits based on their deceased parent's work record until they are 18 or 19, as long as they remain unmarried. If a child is a full-time student in high school when they turn 18, they will continue to receive benefits until they graduate or until two months after turning 19. If a child is disabled, they will continue to receive benefits after 18.

What if the deceased hadn't filed for Social Security?

You're eligible to collect survivor benefits even if your spouse hadn't claimed Social Security at the time of their death. If that's the case, your benefits will typically be based on the amount they would have received at full retirement age.

What if the deceased postponed retirement?

Unlike the spouses of still-living Social Security recipients, if your spouse postponed retirement to collect a larger benefit, your benefit as the surviving spouse will also be based on the higher amount.

Can someone file for their ex-spouse's survivor benefits if they've remarried?

If an ex-spouse dies but you remarry before age 60 (or 50 if you're disabled), you can't receive survivor benefits based on their work record unless the most recent marriage ends. However, if you remarry at age 60 or later, you can continue to receive benefits based on your former spouse's record.

If you did remarry at 60 or later, check your current spouse's estimated benefits to learn if they're higher or lower than the benefits you're eligible to receive based on your deceased ex's record. You cannot receive both, so apply for the higher of the two amounts.

How do I know how much I'll receive?

If you're a surviving spouse, you may receive full benefits at your full retirement age. However, you can receive a reduced benefit amount as early as age 60. If you receive survivor benefits before your full retirement age, the benefit amount will be permanently reduced.

Exception: If you have a disability, benefits can start as early as age 50.

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If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

If your spouse (or ex-spouse) is still alive and is due to receive Social Security benefits, it pays to look into how much you could receive. Here, we'll cover seven essential things you should know before filing for spousal Social Security benefits.

1. Basic eligibility rules

To be eligible to collect spousal Social Security benefits, the following must be true:

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• Your spouse must have claimed their own retirement benefits. As you'll see below, this rule does not necessarily apply for ex-spouses.
• You're 62 or older. However, there is an exception to this rule. You can collect at any age if you care for a child under the age of 16 or who has a disability and is entitled to benefits based on your spouse's record.
• You haven't earned enough work credit for a Social Security retirement benefit of your own, or you have earned a retirement benefit of your own, but the spousal benefit would be higher.

Image source: Getty Images.

2. How much you can expect to receive

Your benefit is 50% of the amount your spouse is eligible to receive when they reach full retirement age. For example, if your spouse is scheduled to receive $3,000 per month at full retirement age, your benefit would be $1,500.

If you decide to receive spousal benefits before you reach your full retirement age, your monthly benefit will be permanently reduced.

3. You can find the numbers you're looking for online

The Social Security Administration (SSA) makes all the facts, figures, and some of the services you're looking for available on their site. You only need to create a free and secure my Social Security account.

Here's a breakdown of what you can do with your my Social Security account:

• Get a personalized retirement benefit estimate
• Get proof that you don't receive benefits
• Check your application status
• Get your Social Security statement
• Request a replacement Social Security card
• Upload documents and submit online forms
• Set up or change direct deposit
• Get a Social Security 1099 (SSA-1099) form
• Print a benefit verification letter
• Change your address

4. Here's what happens if your spouse postpones taking Social Security

Let's say your spouse postpones taking Social Security until age 70 to earn delayed retirement credits and increase their monthly benefit. While they'll be collecting more in retirement, your maximum spousal benefit remains 50% of the amount they would have received if they'd retired at full retirement age.

5. What happens if your work record makes you eligible for benefits

If you're eligible for retirement benefits based on your own work record and spousal benefits, you'll need to apply for both. It's called "deemed filing" because once you apply for one of the two benefits, you're deemed to have applied for both. The SSA ensures that you receive the larger of the two benefit amounts.

Here's an example: One partner is eligible for a monthly retirement benefit of $1,500, and because their spouse is eligible to receive $4,000 at full retirement age, their spousal benefit would be $2,000. Since the spousal benefit is higher, that's the amount they receive.

According to the SSA, "If a spouse is eligible for a retirement benefit based on his or her own earnings, and if that benefit is higher than the spousal benefit, then we pay the retirement benefit. Otherwise, we pay the spousal benefit."

6. Divorced? Here's how to know you're still eligible for spousal benefits

Divorce doesn't necessarily mean you're no longer eligible for spousal benefits. Here's how to know you're eligible:

• You were married to your ex for at least 10 years.
• You're currently unmarried.
• You're at least 62.
• Your ex is currently receiving Social Security benefits, or they've reached retirement age and are eligible to receive benefits but have not applied. You can apply if you've been divorced for at least two years.
• If your ex has reached retirement age but hasn't applied for benefits, you can still apply if you've been divorced for two years or more.

7. You can apply online

Whether you're applying for your retirement benefits, a spouse's benefit, or both, the application can be completed online. If you're at least 61 years and 9 months old, visit the Social Security Administration's website to get started.

Planning for retirement is all about feathering your nest to the best of your ability. If collecting spousal Social Security benefits helps maximize your Social Security income, there's no question it's a win.

The $22,924 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

View the "Social Security secrets" »

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