What Are the Different Types of Retirement Plans That Exist Today?
More than 25% of working Americans don’t have any money saved up for retirement. So what does that mean? They’ll be working until they kick the can.
It’s sad, but it’s the truth. Those who want to retire by the time their 60 or 65 need to start saving money every month as soon as they join the workforce, ideally in their early 20s.
If you didn’t start saving that early, the next best time to start is today. The sooner you begin stockpiling wealth for the future, the better.
There are different types of retirement plans that you can start investing in today.
What are the best ones? Keep reading to learn what plans are available from our modern financial institutions.
401(k) Plans
One of the most common retirements plans available in the financial industry is the 401(k). These are usually sponsored plans offered by companies to their employees. Many times, employers will match a certain amount that employees put into their 401(k), earning them free money.
Taking advantage of employer matching is of the easiest ways to boost your personal finances and long-term wealth.
Wondering what happens when you finally retire and are ready to start withdrawing your funds? Read up on that process on Bogartwealth.com.
Solo 401(k)
More and more workers are moving into self-employment. Whether they are freelancing or running their own small business, it can be difficult to manage your retirement savings.
That’s why a solo 401(k) is so helpful. These are tax-advantaged accounts designed specifically for the self-employed worker. Finally, you can get some of the same benefits as your W2 compatriots.
Individual Retirement Account (IRA)
IRAs are retirement plans that are not offered or managed by employers. Rather, these are plans that individuals can start and fund on their own.
They are often used as a second retirement account, after the 401(k), since the more money you can save and invest today, the better.
The money you place into an IRA is tax-deferred. No taxes need to be paid now, but they will be paid when you withdraw during retirement.
IRAs give you more control over your investment portfolio since you can choose to invest the funds in any assets you want. This is key to portfolio diversification, helping you to gain exposure to assets with more growth potential.
ROTH IRAs are also available, which allow you to deposit after-tax dollars today, and make tax-free withdrawals in the future.
Brokerage Accounts
Brokerage accounts aren’t technically considered retirement accounts since there are no tax advantages to using them. However, they are additional investment vehicles that allow you to invest any extra money that you have laying around.
Most serious investors will also have brokerage accounts in addition to one or two main retirement accounts.
The main benefit of a brokerage account is that there are no penalties for withdrawing funds before retirement age.
Choosing Between Different Types of Retirement Plans
There’s no such thing as the perfect retirement plan. That’s why there are so many different types of retirement plans, which extend beyond those listed above.
For best results, you should consult a financial advisor who can make the best recommendations for your current financial situation and future goals.
Looking for more advice? Head over to our blog now to continue reading.
Trevor Anderson wrote this article on behalf of FreeUp. FreeUp is the fastest-growing freelance marketplace in the US. FreeUp only accepts the top 1% of freelance applicants. Click here to get access to the top freelancers in the world.
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