Improving your saving strategies for retirement now can provide you with the financial freedom you want when you’re ready to enter the golden years. Finding the savings methods that will work for you is the key. Below you will find a few different ways that you can jump start the process. Take a look.
Individual retirement accounts, known as a traditional IRA or Roth IRA, are two different financial investment methods that you can use to save toward your retirement years. The main difference between the two is that one account requires you to pay taxes on the money you contribute, and the other when you withdraw the funds, but both are a great means of saving for your retirement with a minimum of effort or expense.
While there are several options to saving for retirement, the most common way people do so is through their employer with a 401K account. You will find that most employers will offer a match up to a certain percentage of your income, usually from 3 to 6%. For instance, if you choose to invest 6% per pay cycle toward your 401K plan, your employer match your contribution with another 6%. This will give you a total of 12% of your salary put toward your retirement each pay cycle. If you start at an early age, the magic of compound interest and steady contributions will almost guarantee a comfortable retirement.
A brokerage account may not be as popular as an IRA or 401K because it does not offer a tax deferral, but it will allow you they opportunity to invest. There are a wide range of investment options to choose from, including individual stocks and bonds, as well as money markets, mutual funds, and more. More aggressive investment options have the potential to earn a greater return than traditional retirement accounts, but there are substantial risks. If you are young and have time to be more aggressive with your investing, it may pay off, but if you are getting closer to retirement, it would be prudent to be more conservative with your investments.
Traditionally offered through an insurance company, a tax deferred annuity gives you the option to save money toward your retirement goal without paying taxes on the money you invest. This allows you to deposit pre-taxed funds from your paycheck directly into your annuity to grow tax deferred, becoming taxable only at the time of distribution. While this may not be a great invest option for everyone, some like the guaranteed income it can provide for a number of years or even a lifetime.
Outside of an IRA or 401K, you will find that real estate is another common investment used to reach retirement goals. There are a few different ways that you can take advantage of this option. You can either buy and sell, or buy and rent. If you prefer to make your money back in one lump sum, then buying with a plan to upgrade and sell the property for a profit is what you are looking for. You can also buy to rent, which could also provide income during retirement, but your income is dependent on keeping the property occupied.
If searching for an investment property requires time that you do not have, then you can always invest in a fund that purchases real estate investment trusts. Investing in real estate can be quite expensive, and if you think it is a good option for you but you don’t have the money to cover the cost then try an alternative funding source, such as a signature loan. The cash option should help you get started on your investment right away.
Even without the dream of one day owning a small business, you can still invest in one. Becoming a silent partner requires little effort on your part. Just be careful, with this type of investment there is room to fail. Investing in a small businesses may not generate the substantial amount of return you are hoping for.