Dave Ramsey Loves IRAs for 4 Reasons -- So Should You Listen to Him and Open One?

With all these IRA benefits, is this the right account for you?

If you're investing for retirement, you have lots of options to get tax breaks for doing so. You can contribute to a 401(k) if your employer offers one. You also have the option of contributing to various retirement plans you open at a brokerage firm of your choosing.

IRAs, or individual retirement accounts, are the types of plans you can choose from if you're investing for your own retirement rather than signing up for a 401(k). And personal finance guru Dave Ramsey has identified four big reasons why IRAs are a great account to use to save for the future.

Here's why Dave Ramsey loves IRAs

Ramsey explained that he "loves" IRAs for four key reasons. Here's what they are:

• Tax benefits: Ramsey explained that both of the two most common types of IRAs -- traditional and Roth IRAs -- come with generous tax benefits. "With a traditional IRA, you get a tax break now. With a Roth IRA, you get a tax break later. Either way, you win," Ramsey said.
• More flexibility: According to Ramsey, a wider choice of investing options is another key IRA benefit. While workplace 401(k) plans let you invest in only pre-selected assets (usually funds), you can invest in almost anything with an IRA opened at a brokerage firm.
• The account isn't tied to your job: Workplace plans must be maintained with your employer's chosen 401(k) administrator. If you leave your job, you may want to roll the account over to a different tax-advantaged account. Your IRA, on the other hand, has no connection to your job at all -- the account is yours alone to do what you want with.
• Ease of use: Ramsey describes IRAs as "accessible and easy to set up." There aren't too many restrictions on who can contribute (other than income limits) or too many hoops to jump through in order to open your account.

Each of these four benefits have prompted Ramsey to recommend taking advantage of an IRA -- and, for most people, particularly a Roth IRA -- when selecting a plan to save for retirement.

Should you invest in an IRA?

With the tax breaks available for IRA investing, the flexibility to choose between a traditional and Roth account, and the other benefits Ramsey outlines, there's no reason not to put money into an IRA if you qualify to make tax-advantaged contributions.

You should, however, invest in a 401(k) first if your employer offers one and provides matching contributions. Those contributions are free money, and passing it up wouldn't make sense. In fact, Ramsey smartly advises maxing out your 401(k) match first before IRA investing.

Once you have put in the money needed to get the maximum matching contribution your employer provides, following Ramsey's suggestion and making the rest of your retirement contributions in an IRA is just smart.

Of course, if you happen to have money left after contributing as much as possible to your IRA, the rest can go into a 401(k) which has higher contribution limits.

By following these steps, you can make the most of the different retirement accounts available to you. This should help you build the security you deserve in your later years.