Jean Chatzky sends strong message on 401(k), IRA retirement money

The former NBC Today Show financial editor weighs in with major retirement savings advice.

Mar 13, 2025 - 02:30

Jean Chatzky sends strong message on 401(k), IRA retirement money

American workers are often spending time focusing on paying regular day-to-day expenses — rent or mortgage, groceries, car payments and gas, for example.

While doing their best to meet these financial obligations, people also consider the future and how best to plan for their retirement years.

Former NBC Today Show financial editor Jean Chatzky tackles this dilemma with some major advice. She embraces the retirement planning question of whether a 401(k) or an IRA is the best place to start.

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It's not simple. Chatzky has some positive things to say about ways U.S. workers can handle the admittedly intimidating challenge. For example, she points to data that shows average Americans are saving about 8% of their income.

That's not a huge number, but even if it is only aspirational for many people, it's a good sign.

Chatzky strongly suggests that people take a look at their 401(k) and IRA (Individual Retirement Account) options. She proposes a target savings rate and makes an important comment about which of these financial tools functions as the best place to begin.

A retired man is seen exercising on a beach. Jean Chatzky takes on the retirement savings question of how to handle 401(k)s and IRAs.
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Jean Chatzky has major words on 401(k)s and IRAs

Offering thoughts on where to start between 401(k)s and IRAs for those planning their retirement dreams, Chatzky explained her perspective.

"How do you handle that choice?" she asked on an Instagram video post. "It's actually pretty easy, but you first have to understand that both IRAs and 401(k)s are buckets. They are accounts into which you put retirement contributions."

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"If you have the option of a 401(k), you choose the 401(k)," Chatzky continued. "And the reason is that 401(k) contributions are made automatically. The money comes out of your paycheck. You never see it. You never touch it. You never spend it. It is much easier."

Jean Chatzky answers the 401(k) vs. IRA question

Chatzky explained her interpretation of the question about whether 401(k)s or IRAs are most effective as retirement savings starting tools with some words about the options American workers face.

"An IRA may give you the option to buy things that you can't buy in your 401(k), and some people may want that, but it's more work because you've got to cobble it together yourself," she wrote. "You've got to put your own payments on automatic."

"That means that in some cases, you're just not going to do it," Chatzky added. "So, I go 401(k) first, especially if there are matching dollars in the picture. And if you can do both, then you do the IRA."

When Americans are considering investing in IRAs, it is important to distinguish between traditional IRAs and Roth IRAs.

A Traditional IRA involves people contributing money pre-tax, which cuts down on income that is taxed annually. This option is particularly appealing to people expecting to find themselves in a lower tax bracket after retirement.

Roth IRAs, on the other hand, involve contributions made with post-tax money. An important thing to know is that people wishing to invest in Roth IRAs have income limits to consider.

Deciding which works best in any individual case, including wealth, one's current career status and retirement aspirations is an exercise worth taking some time to figure out.

Those anticipating higher taxes in retirement might choose Roth IRAs. People forecasting lower tax rates in the future could benefit from a Traditional IRA account.

The bottom line is that Roth IRAs, Traditional IRAs and 401(k) plans are all tools to consider for retirement savings.

Chatzky recommends beginning with a 401(k) for American workers who have one as an option.