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What are the advantages and disadvantages of different types of retirement accounts?
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Advantages of Different Types of Retirement Accounts:
1. Traditional Individual Retirement Account (IRA): Tax-deferred growth, potential to receive tax deductions on contributions, and flexibility of investment options.
2. Roth IRA: After-tax contributions, tax-free growth, and tax-free withdrawals in retirement.
3. 401(k): Employer match, flexibility in funding options, low administrative fees, and tax-deferred growth.
4. SEP-IRA: Employer contributions, high contribution limits, and potential tax deductions on contributions.Disadvantages of Different Types of Retirement Accounts:
1. Traditional Individual Retirement Account (IRA): Limited contribution limits, penalty for early withdrawals, and trust obligations.
2. Roth IRA: Must meet income requirements and contributions are taxed as income.
3. 401(k): Potential for high administrative costs and limited investment options.
4. SEP-IRA: Restrictive eligibility requirements and employer contributions must be made for each employee.