Retirement Plan Options
What’s the Best Retirement Plan for You?
There are so many retirement plan options out there to choose from. It can make anyone’s head spin. Especially if you don’t know which one is best for your goals. How do you know what will work for your retirement plan?
This is a question many people ask when they begin their retirement journey. And it’s important to note that there isn’t just one option that will solve all your issues. In fact, you should have multiple strategies in place so all your goals are met.
Here are a few of the best options out there for your retirement plan.
This is the easiest retirement plan option for everyone. A pension is all in the hands of your employer. He/she will contribute the money and these funds are managed by a professional. Once you retire, you will be able to collect these funds to live on.
Unfortunately, pensions are not available to everyone. More common with government workers, they are becoming less popular and employers aren’t contributing as much as they use to. So, chances are if you are one of the lucky few who has a pension, it probably won’t take you far.
Contribution plans, such as a 403b or a 401k, are a great way to control your future. It is up to you to decide whether to participate and to select the right plan for you. You can choose how much you want to contribute to the plan and usually, employers who offer these plans will match a certain portion of the contribution.
But remember, a contribution does have limits. For those under the age of 50, you can contribute up to $18,000. And if you are over 50, you can add an addition $6,000. And then there are the issues of being taxed by any withdrawal you make.
An Individual Retirement Account, more commonly referred to as an IRA, is a savings account designed to help you save for your retirement. There two types of IRAs to choose from, both with their own advantages and disadvantages:
- Roth IRAs are best for younger people just starting to save. You can enjoy tax-free growth. And if you have to withdrawal the money for an unexpected expense, you won’t be penalized by the IRS. But a Roth IRA is not available for everyone. You must meet specific eligibility criteria and, like 401(k)s, you can only contribute up to a certain amount each year.
- Traditional IRAs are similar to Roth IRAs but are a better option for those who have a shorter time frame to retire, say within the next 10 years. All contributions to the IRA are tax deductible and you won’t have to pay a capital gains tax (though you will have to pay tax on your contributions and withdrawals). You can’t make contributions once you reach the age of 70 and a half, the time where distributions are required.
An annuity is a type of insurance that allows you to invest right now to receive a guaranteed income stream once you retire. These payments can come in either monthly, quarterly, annually, or in one lump sum. There are quite a few annuity options to choose from but the most popular is the deferred-income annuity where you can control when the income stream can be dispersed.
But be careful that you invest in a reputable company – that company needs to be around for a long time.
Despite what you may have heard, Social Security still makes up for a good portion of older Americans’ income, according to the Social Security Administration. You shouldn’t discount it despite what others say. But do remember – the longer you wait to take out your Social Security income, the greater amount you’ll receive.
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There are other options that you may want to look into. But before you do, make sure you have a retirement planning advisor by your side to help you with your options. Contact Capital Solutions Center now to speak with a financial advisor today.