Final answer:
Financial advisors commonly advise saving around 15% of income for retirement to ensure a comfortable standard of living later on. IRAs and 401(k)s offer tax advantages for retirement savings. While 10% is good, 15% is often recommended for a secure retirement.
Step-by-step explanation:
When considering whether you should invest 10% of your household income into Roth IRAs and pre-tax retirement plans, it's important to note that financial advisors often recommend a slightly higher percentage. The general advice is to "pay yourself first" and save around 15% immediately for your retirement, whether it comes from a paycheck or other sources. By doing so, economics suggest you could maintain a standard of living at 60-80% of your income during retirement.
An Individual Retirement Account (IRA) is a smart way to save for the future, especially given its tax-sheltered nature. There are different types of IRAs, but a traditional IRA allows individuals to contribute pre-tax income, which grows tax-deferred. Conversely, a Roth IRA involves post-tax contributions, which could be beneficial for those expecting to be in a higher tax bracket at retirement. Additionally, workplace plans like 401(k)s allow for investment in various assets with special tax deferment until withdrawal.
Overall, while investing 10% might be a good starting point for some, aiming to save a slightly higher percentage could provide a more secure future. It's also wise to note that tax laws and contribution limits can change, so staying informed and potentially consulting with a financial advisor could be beneficial.