Retirement Savings Options

Retirement is probably something that you don’t want to think about. It may seem such a long way off and yet it is important to think about retirement savings options to ensure you continue to receive a good income when you are no longer employed or working. Many people put off this decision and find themselves in a quandary when retirement looms. So a few carefully thought out plans now will ensure that you can enjoy your retirement to the fullest and do all the things you promised yourself you would. There is nothing worse than working all your life and then discovering that you cannot afford to do anything during your retirement so be kind to yourself now.

As a start to thinking about the different options available, you could consider a few of the points below. You may also have other ideas and plans but the key here is to get on your feet and put your plans into action.

Savings accounts
Many people choose to simply save a little each week or month in a savings account. Interest is applied to the savings account and this can vary from bank to bank. Currently, interest is quite low on savings accounts due to the economic slump many countries are experiencing. However, savings do still grow slowly with this method of retirement savings options.

Pension plans
Many people favored pension plans but these have received bad press of late. This is mainly due to many of the companies holding the funds going into liquidation and the money being lost. As a result, they have lost their popularity. However, the government is now guaranteeing some pensions plans, so if you are eligible for one of these retirement savings options, they should yield a good result for you. You do have to be employed by a company that subscribed to this form of pension fund and you will have to pay into it each week or moth, depending on your payment schedule. Your employer also pays into the plan usually matching the same amount you pay. The great thing about this kind of retirement savings option is that you can opt to receive the money as a lump sum on your retirement or you can have a fixed amount paid as a lump sum and the rest paid to you at intervals (usually weekly or monthly), thus ensuring you have an income during retirement.

401k investment plans
There are a number of investment plans to choose from and one such plan is the 401(k) plan, however, you need to be employed to contribute to this. The money you pay into this type of plan is pre-tax. However, the downside to this is that tax is paid when you withdraw the money at retirement.

Individual Retirement Account (IRA)
The IRA as a retirement savings option is a popular choice for many, however there is a capped limit to the amount you can add to the fund each year. This is currently around $5,000. This plan is also taxed upon withdrawal. As an alternative, you could consider the Roth IRA. Contributions to this type of plans are taxed initially but when you withdraw money at retirement, this is tax-free.

What about the self employed?
There are retirement savings options in place for the self employed, including the Roth IRA plans. There are also self employed pension plans which, although give retirement options for employees of small businesses, can also be used by the small business owner as an employee of the business. These are ideal as larger contributions can be made into these savings plans and they are more flexible too. Therefore, if cash flow is reduced then you can reduce the contributions you make, for yourself of course, not other employees.

There are other retirement savings options available too and if you find one that catches your fancy, always consult a financial professional to provide more details.

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