Using IRA’s for Your Saving Plans
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Why YOU, the sound financial investor must have a solid, failsafe, retirement plan
Life expectancy today is at peak even with life threatening ailments, viral infections and natural disasters on the rise.This goes to show many of us may actually spend many years in retirement.
Preparation for the twilight years therefore becomes an absolute essential. Without discounting Social Security,any government supported pension plans and medical schemes will only count for a fraction of your actual retirement needs. Here’s a good plan for your nest egg… or How to line your nest
The very first amount of money you will set aside that is - excluding the emergency nest egg that you should have already put aside as a sound financial investor - should be regrouped into a tax advantaged retirement plan. this means that the money you invest should grow without taxation until you choose to reclaim it.
The following are three ways in which you can assure yourself that the happy years truly become the happy years
1. Individual Retirement Accounts or IRA’s - You can open an IRA at your preferred bank of choice, brokerage firm or mutual fund company where you can put 100% of the initial $5,000 that you earn annually.
This can be done in 3 ways
IRAs in banks or financial institutions
The safest and most convenient option for investment of an IRA is a Bank of Deposit.
Certificates of deposit are time certificates sold by banks issued for a specific amount of time for a specific amount of money. When that buy shares time period elapses the CD is said to mature and you receive the full amount plus interest accrued.
IRA investment using a mutual fund
This simply means buying investments through a company in which you the investor buys shares. together with the funds that other investors like yourself have amassed the company then reinvests in various things like stocks, bonds, etc..with the purpose of achieving income, price increase on its shares or tax -free returns for its shareholders
Investing IRAs with a brokerage firm
If you study the money market regularly and feel confident about investing on your own it is a good idea to open a IRA with your stock broker or brokerage firm. You are able to manage the money yourself and your broker can advise on the wisest options to take at any particular time.
However investing an IRA through a brokerage firm involves a large amount of capital. You would need to have enough capital to be able to diversify for one, that is able to buy differently from various markets. You would also need to have a safety net to protect yourself in case one or more of your selected stocks fell in price.
2.Go 401k - Investing for retirement through salary reduction. contrary to popular belief this retirement plan has no catch.It provides a way to save,both reduces and defers taxes. Your contribution is deducted from your paycheck. It is a little known fact and an added plus is that your employer actually tops up what you contribute by up to 100% on every dollar in some cases.
Your employer then lets you decide where to invest the money saved for maximum growth.The usual route being company stock, mutual funds, bonds, money market funds and GICs-guaranteed investment contracts.GICs are fixed deposit investments through insurance companies.
The insurer guarantees the amount invested, pays you interest accrued on the initial investment within the duration of the contract and returns these together upon maturity of contract. You will admit, this kind of retirement plan has great cosmetic appeal but remember an investment of this nature relies upon good financial discipline for a length of time. Any withdrawal of funds made before maturity of the contract attracts stiff penalties
3. All of this talk of ‘ invest and do not touch finances put aside ‘ for maximum benefit on returns does begin to sound a bit rigid doesn’t it? You should not let this deter you. It is possible to move back and forth between investments depending on your level of discipline and saving habits.
It also helps to have an experienced financial adviser or personal accountant to help you along the way.
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