Retirement Planning: Everything You Need To Know About The Right Investment

retirement plan, retirement funds, IRA, investment, gold, investing in gold, roth IRA, retirement, health savings account, health costs, HSA, health insurance plan, medical expenses, SEP IRA, 401k, 403b, taxes, withdraw funds in retirement, individual retirement account, taxable income, traditional IRA, self directed IRA
Advertisement

Investing in your retirement is very important. On average, people start investing in retirement in their 20s. The sooner you start saving, the more time your money can grow. This is essential if you want to live comfortably when you’re retired. There are a few investment options for your retirement to provide for your monthly expenses. Before you start investing, we recommend you to discover different options. For this reason, we listed a few investment options that may suit your needs!

Retirement accounts

401(k) or 403(b)

Your employer might offer you a retirement plan such as 401(k) or 403(b) plan. These are qualified retirement plans that allow you to save and invest in your retirement on a tax deferred basis. The difference between a 401(k) and a 403(b) plan is that the last retirement plan is for those working at tax-exempt or not-for-profit organizations (such as schools). If you contribute to this plan, you can lower your tax burden and you do not have to pay taxes on your money in your account, until you withdraw it. A disadvantage of this retirement plan is that you are forced to withdraw all your money at a certain age. After that, you are not able to contribute to the plan anymore. 

457(b)

Another option is the 457(b) account. This plan is offered through local governments and state. You can only contribute if you are eligible for the account. In 2021 you will be able to contribute up to $19,500 and if you are 50 or older, this will ben $26,000. In case you want to withdraw funds before you turn 60 you can do this without receiving a penalty.

Before you decide to go for a 401(k) or 403(b) plan it is important to consider both advantages and disadvantages. Another way to save money for your retirement is through IRA accounts.

IRA account 

Traditional IRA versus Roth IRA

An IRA account (Individual Retirement Account) is a tax advantaged account that helps you save money for your retirement. With an IRA account, you have access to many more types of investments than a 401(k) or 403(b) plan. You can choose a traditional IRA account: if you put money in this account, it is tax-free and each year you get a tax refund. When you take your money out (after the age of 59,5) it will be taxed. You can also choose for a Roth IRA: the contributions come from a taxable income and you will pay tax at the front end. If you take the money out, it will then be tax-free. If your tax rate is now low, it is better to choose for this type of IRA. 

Self-Directed IRA

This type or IRA is different than the ones mentioned above. This one differs in the investments that you are able to make. With self-directed IRA’s you are able to place funds into alternative assets (cryptocurrencies, metals and real estate for example.)

SEP IRA

SEP IRA (Simplified Employe Pension IRA) is mainly designed for small business owners with a few employees. You are able to set aside up to 25% of your compensation (up to $58,000). The funds that are withdrawn are subject to taxes and you can only take it out from the age of 72. If you want to withdraw before you’re 59, you have to pay penalties on the amount taken out.

HSA

Health Savings accounts (also known as HSAs) are similar to personal savings accounts. The difference is that the money in here is used to pay for health care expenses and you control the money in you HSA. An advantage is that deposits are not being taxed – it helps you lower your taxes, pay for healthcare and you can even save for retirement.

With an IRA account, it is impossible to lose all of your investments. Every investment comes with risk as some of it might lose value over time. One type of investment that is considered stable is gold. We favor the gold IRA since it holds its value. Even if severe market fluctuations and inflation have happened. If you want to choose the right investment we recommend you to do more research online because every investment is a personal decision.  

Advertisement