Saving for retirement isn’t an easy feat. Most of us know this on some level, but it’s all too easy to simply brush it aside and worry about it “later” when we’re young. What happens, then, once we do reach that “later” date?
If we haven’t prepared at all, then retirement can be a not-so-fun experience. Sure, there are social programs to fall back on, but they’re often not going to be able to provide enough to give a truly comfortable lifestyle once you finish working. Honestly, we’re seeing more and more people of retiree age having to take on part time jobs to sustain their current way of life.
One of the few ways that we can prevent that, though, is to start thinking about retirement as early as possible. That means making investments early on as well as considering specialized savings accounts such as IRAs and 401(k)s. Today, I’ll mostly be focusing on IRAs, but pensions and 401(k) are at least worth being aware of.
Individual retirement arrangements are a critical part of preparing for our golden years, even if they aren’t something that often gets much publicity. If you would like to get a better idea of what they are and how they work, make sure to stick around! I’ll be tackling both of those questions in detail.
What is an IRA?
First, we can take a look at what they are, since that’s a pretty easy question to answer. As I said earlier, “IRA” stands for individual retirement arrangement. They’re investment accounts designed to give the holder tax benefits, although those differ depending on the type that you go for.
#1. Traditional
Traditional IRAs are the most popular type thanks to its model of how taxes are taken out from your account. For this kind, the taxes are taken out when you make your withdrawals. So, your bracket as a retiree will determine what you’re charged, which is beneficial for a lot of folks. More often than not, you’re making more income before your retirement years than after.
The other “rules” involved are similarly beneficial to most consumers. There’s a limit of about five thousand dollars that you can contribute each year until you are fifty-seven, and then it increases a bit. While it’s a bit basic, there’s nothing wrong with going for this style.
#2. Roth
Honestly, these ones aren’t all that different from the traditional style, as you can learn about more on this page. The largest distinction is that the taxes are charged when you make your deposit, making this option good for anyone who thinks they will be in a higher bracket when they retire versus when they are still working. Otherwise, the same stipulations apply.
#3. Simple IRA
While they might be called “simple” individual retirement arrangements, it might surprise you what this actually means. You see, “SIMPLE” is an acronym that stands for “savings incentive match plan for employees.” It’s relatively similar to a 401(k) or pension, but with the tax deductible part remaining intact.
There are a few things to keep in mind if you plan on opening one, though. For one thing, the contribution limits are a little lower than the ones for something like a 401(k). Additionally, there are some requirements for the level of income to make a person eligible to make one of these. Most of the time, they’re used by small companies for their employees.
#4. Self-Directed IRAs: They’re a Big Deal
I’m giving self-directed IRAs a section all of their own because of how important they are. Now, a lot of folks get intimidated by the whole “self-directed” thing, which I can certainly understand. Don’t forget that you can have a financial advisor or accountant help you with it, if you’re not sure exactly how to make the most of an account like this.
In addition to that, there are also websites like this one, https://www.cobizbank.com/which-ira-investments-are-the-safest/, which strive to offer advice on how to approach individual retirement arrangements in the first place. If you’re stuck on where to begin, checking out some of these resources might be helpful. Anyhow, this style of IRA is sort of a “miscellaneous” category, since you can do so much with them.
One of the most popular things to do is to open a precious metals IRA account. These are, as the name implies, dedicated to holding precious metals stores. Often this is gold bullion, although stocks for certain companies in that market may also qualify. Some coins that contain the adequate percentage of raw metal are also eligible, and there are lists that you can consult to get more details on that.
Now, there are a few other options as well of course. United States bonds are pretty much always going to be something that you can fall back on, even if they are not going to generate the most profit out of all the possible assets that you can invest in. Remember – since you can open multiple IRA accounts, you can keep things as diverse or as homogenized as you’d like!
Why This Matters
At the end of the day, maybe it doesn’t seem all that important to focus so heavily on preparing for the future when you’re contending with plenty of trouble in the current day. Honestly, I totally get that. For a long while, I wasn’t worried about planning out my financial future in the slightest.
I was living paycheck to paycheck, struggling to make ends meet, and putting money aside for retirement was pretty far from my mind. However, as tough as it can be, it’s worth it in the long run to pinch a few pennies even during these moments of hardship. The more that you’re able to contribute to your retirement now, the better off you’ll be in the future.
So, even if it’s tempting not to worry about it right now, trust me when I say that you’ll be thanking yourself later if you go ahead and get started ASAP. IRAs might seem kind of intimidating and complicated at first glance, but some of the blogs that I’ve linked to can help clear things up even more if you’re still confused.
We can all stand to learn a little bit more about how retirement works, after all, so hopefully you’ve found what I’ve had to say informative as well. Keep your investment portfolio as diverse as you can, even for your retirement funds – never hedge all your bets on one asset working out. Try checking out things like precious metals if it interests you, especially if you’re worried about inflation impacting the value of the dollar.
