Our economy is recovering, but it’s still sluggish, causing many people concern – especially those in the retirement age bracket. Well-placed investments can do wonders to close the gap between what you should have in your retirement fund, and what’s actually there. It’s never too early to invest. Even if you’re still far from retirement, consider these investments to keep you financially secure down the road:
Standard 401(k) Plan
A 401(k) plan allows you to contribute tax-deferred money from your paychecks, saving you thousands in tax dollars to help you build faster. You do not have to report money contributed to a 401(k) plan on your annual taxes. If your employer offers a 401(k), you will benefit from using it regardless of your age. Some employers even offer to match your 401(k) contribution, which essentially gives you free money.
A solid 401(k) can provide backup funds during hardships (although this isn’t the ideal use for them), and is immune from creditors. Opting to roll over your 401(k) from one job to another is the best way to keep increasing your retirement funds, rather than withdrawing them. Keep in mind that when you withdraw money from your 401(k), the money is taxed.
Roth 401(k) Plan
If your employer offers a Roth 401(k), you would probably do well to take it. Roth 401(k)s are essentially the opposite of regular 401(k)s: Your contributions are taxed, but your withdrawals are tax-free. Benefits of a Roth 401(k) are that your money grows tax-free, and you don’t have to pay income taxes when you cash it out.
Deciding which 401(k) plan is right for you depends on factors such as your tax bracket and income. If you’re in a high tax bracket, the immediate tax break of a regular 401(k) might be more appealing than benefitting in the future. You can also contribute to both 401(k) plans at once, if your employer offers both, and divide your savings between an account that’s already been taxed and one you’ll owe taxes on.
Annuities are a topic of debate among people saving for retirement, but most experts cite great benefits from choosing to invest in an annuity, as long as you can afford to pay the fees. Investing in an annuity means you’ll be guaranteed a steady income every month, quarterly, or annually for the rest of your life. While this sounds like an incredible opportunity, securing peace of mind comes with a price.
There are several fees associated with annuities that buyers need to understand. You should also ensure that the insurance company selling the annuity can be trusted with your money and will still be around when you’re ready to start your payout. Read here for more information about the pros and cons of annuities.
The stock market is ripe with moneymaking opportunities. The earlier you invest in the stock market, the higher your chances are of coming out with a sizeable profit. Stocks are without a doubt one of the best tools out there for building wealth, and the best part is you don’t have to be rich to join. Taking a few standard courses on understanding the stock market is usually all it takes to be on your way to investing, and the payout can be huge.
You can avoid brokerage fees and paying commissions by learning how to self-manage your stocks, without the help of a broker or advisor. If you go this route, be sure to read up on the basics of the stock market, and don’t get in over your head. If a company you work for enables you to become a shareholder, it’s always wise to take them up on the offer.
Related to stocks, bonds are another way to boost your retirement investment. When you purchase a bond, you’re guaranteed paid interest on that bond, paid to you by the issuer or the entity you’ve lent money to with your bond. Typically, bonds pay interest twice a year, granting you a predictable stream of income.
Bonds are a more stable option than stocks, but the payout may not be as great. Bonds have to mature over time for the purchaser to get back the entire principal, while stocks can turn a profit within one day. Like all investments, there are risks involved that you must weigh against the benefits to decide if it’s the right investment for you. Stocks and bonds are usually invested in at the same time, to better increase the chance of a high return.
Real estate, precious metals, gemstones, valuable antiques, expensive cars, collectibles, and other commodities or “hard assets” are smart ways to invest, especially when you’re guaranteed a return on the investment. For example, gold has been a valued investment for centuries, and has withstood the test of time. Gold has appreciated over 500% since 2000, and is predicted to keep rising.
Real estate is another worthy investment, but it doesn’t come without risks. Investing in rental properties is complicated and can lose money if not done with care. The housing market is always subject to trends, and there is no guarantee of a positive return on investment. However, if you have enough funding to support a rental investment, you could make continual returns on it for years to come.
Savvy investors place their money in more than one of these ventures simultaneously to avoid pinning their entire financial future on one single investment as well as to optimize the chance of profiting. Choosing the correct investments for your lifestyle and income can be made easier with the help of an expert financial advisor who can set you up to begin investing right away. It’s never too soon to invest in your future.