Planning for retirement is a worthwhile and manageable task whether you’re advanced in your career or you’ve just landed your first job. Being knowledgeable about the most helpful tools for retirement planning can help you set yourself up for many years of comfort and freedom.
The vast array of options when building your retirement strategy can be overwhelming. Here are a few basic tools that can help:
Annuities
When you purchase an annuity from an insurance company, you provide a sum of money up front which is then paid to you in instalments over time. This helps ensure that you can access the funds you need when you’re retired without using them up too quickly. You can also arrange to have your annuity passed on to your beneficiaries if there are remaining funds after you die.
Different types of annuities accrue interest at varying rates. A fixed annuity has a set interest rate that is determined when you purchase it. There’s also a variable annuity, which doesn’t have a guaranteed interest rate and will have higher or lower payments depending on the performance of stocks.
When you purchase an annuity, you can decide if it will be fixed, variable, or another type entirely, and if it will begin paying out immediately or in the future. This flexibility makes it one helpful tool for retirement planning.
IRAs (individual retirement accounts)
An IRA is a bank account where you can place your retirement savings with some tax benefits. Different types of IRAs offer slightly different terms: commonly, you can make tax-deductible payments to your IRA as you earn money, and your IRA’s earnings are tax-deferred until withdrawal.
There’s also the Roth IRA, which collects a portion of your income after tax. When you’re retired and want to access it, withdrawals from your Roth IRA are tax-free.
You can use an IRA whether you’re self-employed or work for a business – in fact, you can open an IRA specifically for rolling over funds from a 401(k) if you’re leaving a workplace that set one up for you.
Mutual fund investments
Investing in mutual funds is one of many ways to use the stock market as part of your retirement plan. There’s always an element of risk with investments, but mutual funds can be a desirable option because they’re made up of stock from many different companies. Owning stock in multiple companies diversifies your investments, which means you’re at less risk of losing money in the event that the stock of one company loses value.
Investing in mutual funds or buying stocks and bonds can be profitable, but the stock market carries inherent risk. If you want help perfecting your strategy, it doesn’t hurt to talk to a financial planner or adviser.
After you’ve dedicated years of work to your career and finances, retirement ought to be the ultimate opportunity to live like a kid again. A bit of forward thinking and a solid retirement strategy may allow you to spend your golden years riding boats, playing chess, or exploring other hobbies and adventures you don’t have time for just yet.