Anyone that wants to plan for their retirement knows that you need to start earlier rather than later. Saving and investing are a big part of that.
The power of interest is what you can thank for that. The sooner you put your money into those retirement accounts, the sooner it will start to gain interest and turn your money into more money.
No matter how long you have until retirement, there are always things you can do to increase those savings. You can start at any point, but getting started the right way is important.
A 401k may not be an option for you, so what are some 401k alternatives that you can consider? Check out our top 5 list below to see what you may qualify for.
5 Useful 401K Alternatives for Your Future
While a 401k may be the more conventional route for people that want to invest in retirement, there are actually other options that may be a better fit for you.
Whether your business doesn’t offer 401k accounts or you own your own business, you may have special circumstances that mean you need to be a little more creative.
Finding a good place to settle down thanks to the work of a Senior Living Developer is not the only thing you have to worry about when you are planning to retire. Money is important, too.
Consider some of these options when you are planning for your future retirement and see if one may be just what your financial situation needs.
1. Purchase Variable Annuities
A variable annuity is something that is signed between an insurance company and an investor. The investor agrees to purchase this annuity through a payment series or single payment and the insurance company will make periodic payments to the investor at a specified date.
A lot of people choose to use this for retirement because they can select the date in which their payments start, whether that be on the same day or years and years into the future.
There are occasionally high fees and some various tax penalties that can be involved with this option. Because of this, it is important to understand completely the terms of the contract before you sign and make the investment.
2. Index Funds
An index fund is an investment fund that is based on different stocks. For instance, you are essentially buying the securities that make up an index of stocks and your investment is going to mirror the performance of those stocks.
This investment is a good choice because you are investing in a lot of different stocks within the index rather than just one stock. It gives you a little more security to do it this way.
3. Traditional IRA or Roth IRA
An IRA is an individual retirement account. Any person that is under 50 years old can contribute up to $5,000 every year to this type of account.
IRAs come as traditional IRAs or Roth IRAS, which is similar to 401k options.
A traditional IRA has extra tax benefits that will help you now instead of when you retire. The contributions that you are currently making will be tax deductible.
On the other hand, a Roth IRA will give you tax benefits later and they are slightly different. The contributions to the IRA are not tax deductible and if you withdraw during retirement, the withdrawals are tax free.
You have to meet certain eligibility requirements to set up a Roth IRA, so double check those requirements to see if you can qualify before trying to get one.
4. Simplified Employee Pension IRA
This is a great choice if you are someone that owns your own business or you do freelance work.
Simplified Employee Pension Individual Retirement Accounts (SEP IRAs) are similar to a traditional IRA, which means you get your tax benefits right away rather than having to wait.
No matter what size your business is, you can get a Simplified Employee Pension set up and make contributions that are tax deductible. Even if you work alone, you still can qualify for this option.
5. Change Your Savings Account
Putting some money into a certificate of deposit, a money market account, or an extra high-yield savings account can be a positive investment choice. In fact, it’s probably less risky than you may imagine.
As the Federal Reserve rates increase, so do the savings rates that banks offer. Usually, this is the best time to start upgrading your accounts and get extra interest.
Almost all of the accounts are insured under the FDIC. The only risk with this type of option is that you might not get enough interest on the deposits in comparison to inflation.
If you choose to get a certificate of deposit, you are going to need to wait until the end of the term to get your money unless you pay a fee. It’s good to know exactly what the terms are before you choose anything other than a savings account in this arena of finance.
Consider Alternatives to 401K Investments
There are plenty of 401k alternatives that you can think about putting your money toward if you want to plan for retirement.
Getting your financial situation sorted out sooner rather than later is a wise choice if you want to be well off in your retirement. In fact, you may want to get started today if you haven’t already.
Get more information on our website to help you begin planning for retirement. You’ll thank yourself when retirement comes!