How Can I Save for My Retirement
Saving for retirement is one of the biggest financial objectives any individual faces. Before you start with your saving you should first try to find out how much you will need to save for retirement. You can check with real people’s experience how they manage their money in retirement. Besides, most people miscalculate how much will be required to live on in retirement. So, it is very important that you understand how much is enough and what you need to save to generate it.
The amount of money required in retirement and the money that one should save in advance to deliver that income level will vary depending from one person to another. No matter what, you should have a defined contribution pension fund, which should be enough to last you your whole retirement. The best way to achieve your retirement goal is become proactive in setting money aside. There are several employer-sponsored plans and individual retirement account that will help you to save for your retirement. But when such options are not available you need to consider other individual saving plan for retirement such as brokerage accounts, annuities, real estate and other small business ownership.
Brokerage accounts are one of the most popular alternatives to the conventional retirement saving plans. When you have a conventional retirement savings you can enjoy unique benefits offered to the savers such as tax deferral and investment options, but such benefits are not available with brokerage accounts. Brokerage accounts include different investment selections that include exchange-traded funds (ETFs), stocks and bonds, mutual funds, exchange-traded funds, real estate investment trusts and money market funds. Investing on stocks and mutual funds are the biggest source of potential profit compared to traditional savings or checking account. On the other hand, bonds and money market funds are somehow conservative, but they can be beneficial in the long term and provide stability to a portfolio. Brokerage accounts can be availed through online platforms, banks, credit unions, financial adviser and licensed broker.
Tax- deferred amoralities is another way to achieve your retirement savings goal. They are offered through insurance companies and provide tax deferral together with different investment opportunities. Besides, they are offered with either fixed interest rate, indexed interest rate or a variable interest rate.
The funds deposited into annuity will be taxable once they are distributed during the retirement years, but they will grow tax-deferred. Besides, annuities will provide you a guaranteed income stream for a few years or for a lifetime. Annuities might not be appropriate for everyone, as they are only backed by the issuing insurance company’s claims-paying ability. Thus, investment performance cannot be guaranteed.
Real Estate Investment
Another great option to save for retirement is investing in real estate. Individuals are free to purchase real estate for the sole purpose of generating a stable income source during retirement years. For instance, you can purchases a multi-family home and live in one section and rent out another. This will effectively reduce your total living expenses and also help you in paying down the mortgage balance. When managed properly, such strategy can help you to generate funds that can be set aside for retirement goals. However, the transactions and maintenance of real estate are expensive. Besides, finding quality tenants might not be easy.
Small Business Investment
Another great option to save for your retirement is to invest in a small business. By business, it necessarily does not mean to become a business owner. You can also invest in an already established company. The profits received from such small business are not capped and thus the potential return received by such investment is higher compared to other alternatives. However, such investment also carries a great deal of risk as there is no guarantee that the business will generate a substantial return.
So, if the traditional retirement accounts are not available then you still have a number of ways to invest and save enough for retirement. No matter where and how much you invest, make sure you work with a trusted financial adviser.