Do you feel like you only just now realized that you’re older than you think? Us too. While it’s true that our twenties are a time for reinvention and adventure, as we enter our thirties and forties, we start to take stock of our lives and our futures. And what better time to start thinking about retirement than now? Retirement and investing are two of the most common concerns among Millennials who are anxious about their futures and how they’ll afford their retirement. The good news is that there are many great retirement savings and investing options that don’t cost an arm and a leg. And some of them are so good, they’re also great investments for previous generations. Here, we highlight some of these so-called golden oldies that are still as golden today as they were when they were first introduced.
The 401(k) plan
The 401(k) plan is the most popular retirement savings option for those who want to invest their own money. The idea of a 401(k) is that you put in pre-tax dollars and get a certain percentage back each year, which you can then invest into various options. Gradually, as your investments increase in value, they will grow and can help you retire with a higher net worth. Here are some low-cost investment options:
Some investments require more time and energy than others. When considering investing, it’s important to understand what takes up the most time for your business so that you can allocate those resources accordingly. For example, if your company offers an exceptional affiliate program but has a high cost per sale or commission rate, it may be best to focus on other strategies that don’t require extensive work from your team like email marketing or SEO campaigns.
IRAs seem like a good option for retirement savings. The name is short for Individual Retirement Account, and these accounts let you invest in stocks or mutual funds. They also come with account fees, but they’re still a good option to consider as an investment.
The Theroth IRA is a revolutionary retirement account intended to help you save for your future. It can do this because it’s designed to offer the features and benefits of a Roth IRA, but with the tax benefit of a Traditional IRA. This means that you’ll be able to contribute more than $5,500 per year ($6,500 if you’re 50 or older) into an account in which the money grows tax-free until you retire. And when you do retire, your withdrawals will be tax-free as well (provided they are used for qualified retirement expenses).
The traditional IRA
The traditional IRA is a savings account that allows you to invest in stocks, bonds, and mutual funds. But what sets the traditional IRA apart from other retirement savings accounts is that you can withdraw money from it before you reach age 59 1/2 without incurring a penalty.
The Roth IRA
The Roth IRA is an individual retirement account that offers tax-free growth and tax-free withdrawals. You can invest as little as $5,000 into a Roth IRA and it will grow on a tax-deferred basis.
There are no mandatory distribution requirements for the Roth IRA; in fact, the IRS won’t even know about your investments because you have the option of reporting your earnings to the government. So, if you think you’ll need to take out money in retirement, this is a great option.
1) The Roth IRA can be opened with as little as $5k 2) There are no mandatory distribution requirements 3) It will grow on a tax-deferred basis 4) Earnings don’t need to be reported to the IRS 5) Tax-free withdrawals 6) Easy transition from high fees investment 7) Small fee
The Simple IRA
The first option is the Roth IRA. This retirement account has become the go-to method for Millennials who want to create a nest egg on a lower budget. These savings accounts offer tax-advantaged compounding and are great for people who are just entering their working years. If you’re not sure how to get started, talk with your financial advisor or accountant about what options might be right for you.
The Rollover IRA
This is one of the more well-known retirement accounts, which allows you to defer taxes into a Roth IRA and then withdraw the total amount of funds at retirement without paying any taxes on it. The account can be set up for five years or for a lifetime.
Now that you know the differences between the 401(k) plans, IRAs and Roth IRAs, it’s time to figure out how to avoid these mistakes.
First, ask yourself one question: “Do I want my money to grow tax-deferred?” If the answer is no, then you’re not going to want to make a contribution to a 401(k) plan. If you’re not sure which type of IRA is best for you, ask your tax preparer which plan they recommend.