Choosing the right vehicle for your retirement savings can make a significant difference to your total nest egg. Because of the tax advantages that certain retirement options offer, your retirement investments will compound at a faster rate. Add to this the employer contributions available with certain retirement accounts and the difference can be huge.
When it comes to retirement planning it is better to err on the side of doing too much rather that too little. Most people who retire at the age of 65 can expect to live between 15 – 30 more years. This means that it can make sense to make use of more that one retirement savings option if you have already maxed out the contributions on one of them.
In order to help you make the right retirement savings vehicle in 2013 we have compiled the following guide:
401(k) retirement accounts
This is one of the simplest and most commonly chosen options for retirement savings. These plans are sponsored by your employer with a set amount deducted from your pay packets. You can decide with your employer how much these deductions will be. Generally any contributions that you make will be matched in part in whole by your employer and so it makes sense to max them out. Contributions to 401(k) accounts are not taxed until you retire and so they are excellent vehicle for any investment savings. In 2012 the maximum amount that you could contribute to your 401(k) was increased to $17,000 a year or $22,500 if you are over the age of 50.
Individual Retirement Account (IRA)
If you are self employed or a business owner then you will not be able to use a 401(k) retirement account. Typically the best option if you fall into this category is an IRA account. There are two basic types of IRA account: traditional IRA and Roth IRA account. The difference between the two is that with a traditional IRA account you can make contributions using tax free money to your account but you will be taxed when you make withdrawals after you retire. With a Roth IRA account you contribute using taxed income but any withdrawals made after you retire are tax free. Generally if you have surplus taxed income it makes sense to choose a Roth IRA. You can contributions of up to $5000 a year to your IRA accounts.
While IRAs and 401(k)s will be the preferred retirement savings vehicles for most people, if you have already maxed out your contributions but still need to save more for retirement you might want to look at one of the following options.
When looking at other places to save for retirement it is important to look at the tax implications. Ideally you want investments that distribute as little as possible in taxable income and instead are taxed as unrealized capital gains. Short term capital gains and income are currently taxed at 30% vs. 15% for long term capital gains.
Two investments that meet this criteria are Exchange Traded Funds (ETF) and tax managed mutual funds. ETFs are traded on the stock exchange in the same way that shares in a list company are. As ETFs aim to track either an index or underlying asset they are inherently tax efficient. Tax managed mutual funds use methods such as offsetting gains and losses in order to minimize taxable distributions as much as possible.
Finally remember that the retirement savings option that you choose is only one part of the picture. What you choose to invest your savings into is equally important. John Labunski Retirement Talk Radio host and retirement savings expert encourages people to “to place their hard-earned savings in low-risk assets.” Many people nearing retirement have found that their investments in real estate and stocks have performed much worse than they expected over the last decade. This has left them having to post pone their retirement date and to continue working. More conservative investment choices would have allowed them to preserve their capital and to retire earlier.
The keys to success with retirement savings is to start as early as possible, to choose your investments wisely and to select the right retirement savings vehicle. If you do that you can be sure to really enjoy your golden years.
The internet was basically created in order to allow for a more effective communication between a large masses of individuals in a very short period of time. Yet at the internet’s current state, there is so much info that people can easily get overwhelmed. You can easily find some inspiration on the internet, but I think that you will also be interested in ideas that will allow you to monetize your knowledge and turn it into something that reaps profits. Below there are a few Tips for a Successful Small Business you can take a look at.
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Eliminate the ideas that don’t interest you
There are many bloggers out there who have success due to their passions. So let’s not ramble anymore and just take a look at the next questions and try providing an honest answer to each of them:
If you could do anything, what would that thing be?What did you like to do when you were a kid?Is there something that naturally comes to you and you think that anyone can do it or you are impressed that not everyone can actually do it?What is it that you’d see yourself doing out of pure pleasure even if you wouldn’t make money with it? If you had plenty of free time, what would you decide to do with it? What can you talk or think about for extended periods of time?What is it that you’re interested in?
Owning and operating your own business is one of the most rewarding things a person can do. It is also one of the most challenging. If you have decided you are ready to start your own business you probably have hundreds of ideas running through your head.
The first steps in starting a business are often the most important they will be the foundation on which your business is built. Making a mistake at an early stage will not always be fatal, but early mistakes are often the most expensive to fix.
The first steps to starting a business and why they are important:Mission and values Statement
- What do you want to achieve? Many will answer “make lots of money” which is of course a fine mission statement, but it is important to get clear in your head how you will achieve it and what your key values are. It is vital to do this at the start because when the money is rolling in and you are taking on employees there won’t be time.
- A SWOT analysis is important so you can understand exactly where you stand what you have and what you need.
-Strengths – What have you got that others don’t? Knowing what your strengths are allows you to capitalize on them.
- Weaknesses -Knowing where you are weak means you know where to strengthen as you grow. If you can’t think of any weaknesses than you either have the greatest idea of all time or you need more research. Even Google and Coca Cola had weaknesses when they started out.
A business plan is an important road map for any business willing to succeed. All entrepreneurs should learn how to write a great business plan. It is a living business document that normally projects five years ahead and sketches the route your business intend to follow to grow its revenue in future. It is the blue print that helps businessmen manage and navigate their businesses and at the same time help potential partners, lenders and investors to understand their business strategy and the likelihood of the venture’s success.
A good business in never finished, you must keep revising it, reviewing it constantly and building upon it. Writing a great business may seem a daunting task to many people, however, it is a simple task provided one knows where he or she intends the business to be in future. If you are considering starting your own venture writing a business plan is normally the first step. It helps the entrepreneur describe his or her products and services, develop a detailed marketing strategy and layout his or her operational and sales forecasts. It involves cash flow projections that help the business to remain on the right track to achieve its revenue growth.
If you wish to source for capital from any financial institution or a venture capitalist a business plan is very important. It is indeed the first document that any financial institution or investor will ask for before any funding is granted. Often the investors will ask you questions regarding your business plan to just prove that it is viable. For the idea of funding you will be needed to add extra sections on your plan describing the management team as well as the background information about your business. Your business plan must prove to the venture capitalists and other investors that they will make money. They need to be assured that they will get a return on their investment.