You work hard during your working years. For the most part, you are working to achieve the best possible standard of living that you can possibly secure. This usually includes looking for ways to save and invest your money wisely.
While you are able to earn wages, you need to keep an eye on the present and the future. After you’ve done everything you can to build a comfortable lifestyle, you won’t want to settle for anything less when you retire. You have an absolute right to keep the standard of living you desire during your golden years.
With your retirement in mind, now is the time to start planning your finances. To help you with that, here are some retirement tips that you can implement as you head into 2022.
Make a plan
With your future at stake, you cannot afford to try to “inspire” it over the next few years. You need to start planning your retirement finances now.
There are a couple of things that you need to decide. First, you need to decide when to retire if there is money. It doesn’t have to be a hard date, just a date that you can use as a guideline for planning.
Once you have a rough idea of when you want to retire, you can work out how much you will have to save up to retirement. The target amount should be what you are likely to need to maintain the lifestyle you want in retirement.
Once you have a rough idea of what financial resources you will need, you can begin developing a savings and investment strategy that will bring you what you need. Be careful if you put too much emphasis on social security. Your savings and investment strategy should be based on the resources you can create now and in the near future.
Best investments for retirement
To be clear, it takes discipline and sacrifice to meet your retirement goals no matter what they may look like. The sooner you start saving and investing, the sooner you can achieve your goals. So let’s take a look at some investment options that work well for people with long-term retirement goals.
Self employed 401 (k) or individual 401 (k)
If you are under 40, your best investment options are those that allow you to defer taxes while earning. If you work for an employer that offers access to an individual 401K savings account, this is an option you must consider.
Why? First, all of your contributions would be made in pre-tax dollars. This effectively defers your tsx liability until you use your retirement account at the age of 59 1/2 years or later. Any income you have before retirement will also be deferred for tax purposes. In addition, many employers offer a “suitable” incentive to encourage employees to save and invest. If you were to invest 6% a month with 100% coverage, your employer would effectively give you a 6% increase for your retirement. This money may take a few years to invest, but eventually it could be yours.
If you are self-employed, the IRS will give you access to a self-employed 401 (k). Your investments and income would be postponed but you would not have access to appropriate contributions.
Simple IRA, Sep. IRA, Roth IRA
If you’re self-employed or work for an employer who doesn’t offer a 401 (k) option, you can invest in an IRA account. The simple IRA option is ideal for employees who have access to the 401 (k) option. All contributions and income are tax deferred until retirement.
If you are self-employed, the SEP IRA would be ideal. The IRS would allow you to invest the lesser of 25% of your income or a statutory maximum on a tax-privileged basis.
A Roth IRA works the other way around. You would make all of your contributions in after-tax dollars. However, from that point on, all of your earnings would be tax-free.
Some investors prefer a very conservative investment approach. With an annuity, the principal portion of your annuity payments is guaranteed, meaning the principal is never at risk. It’s conservative.
As a procedure, you would buy an annuity contract from an insurance company. The effective return on investment would be very small, but the principle is safe. You would make your annuity payments over a prescribed number of years, at which point the payments would cease. As part of the annuity contract, you would also create a payment schedule so that you receive your distributions. You likely have the option to start taking distributions right away or postpone them to a later date. You are not required to pay any tax on your earnings until you start making distributions.
Dozens of other retirement options are available to you. It is up to you to determine which option best suits your retirement needs.