The Ultimate Guide to Finding the Best Investment Plan for Retirement

Planning for retirement is so important for your financial future. Too many people today put off saving for retirement or fail to plan for it altogether.

For most people, social security won’t cover all their expenses during the retirement years. So it’s important to have a plan.

There are many ways to save for retirement. And the earlier you start, the better.

How do you know what the best investment plan is for your needs? Your best bet is to choose a combination of investment plans that fits your unique situation.

Let’s take a look at some options.

Pension Plans

If your employer offers a pension plan, you should take advantage of it. It requires no effort on your part other than working.

Your employer contributes the money, and the plan is managed by financial experts. You collect the pension when you retire.

Although pensions are still used for most government jobs, they are losing popularity in the corporate world. And all pensions aren’t created equally.

For many workers, pensions aren’t as generous as they once were. Some employers no longer offer cost-of-living adjustments.

That means that after you retire, the monthly payment would remain the same indefinitely. So it’s important to have other investment options even if you do have a pension.

Contribution Plans

When you’re searching for the best investment plan, don’t overlook defined contribution plans. Plans such as a 401k or 403b can help you prepare for retirement.

If your employer offers a savings plan, you can choose if you want to participate. You can control the contribution amount and the options.

Contributions are deducted from your pay, so it’s an easy way to save with little effort on your part.

Many employers will match a portion of your contributions. In some cases, they will match your contributions dollar-for-dollar.

If you have this option at your place of employment, you should definitely take advantage of this savings opportunity. And if possible, you should try to refrain from cashing out your savings plan and instead let it grow for retirement income.

Roth IRA

Roth IRAs are a popular option for investors. This savings plan is great for younger investors who may not have the option of an employer-sponsored plan.

Roth IRAs are highly regarded by financial experts due to the perks of tax-free withdrawals and tax-free growth.

With this savings plan, you pay the taxes at a known rate and allow your money to grow tax-deferred. But this type of IRA is not for everyone because there are contribution limits.

You can continue to contribute after retirement, and there’s not a penalty for withdrawing contributions before you become 59 1/2 years old. There’s a federal penalty, however.

Before making any important financial decisions or investments, be sure to consult a financial expert.

Traditional IRA

Traditional IRAs have no income restrictions, so anyone is eligible to contribute. There are limits on annual contributions, however.

Your contributions to a traditional IRA are tax deductible. With this kind of IRA, you get tax-deferred growth, but you’re required to pay taxes whenever you withdraw funds.

This type of IRA is subject to required distribution at 70 1/2 . And contributions cannot be made after this age.

When considering the best investment plan, a traditional IRA is good for those who plan to retire within 5-10 years. You get the benefit of both the upfront tax deductions and the tax deferral.

Buying Annuities

Many investors choose to purchase annuities. These are insurance products which allow you to invest now and receive income after retirement.

You can choose to receive payments in a lump sum, quarterly, or monthly. There are a variety of annuities to choose from.

The deferred income annuity (DIA) is a popular choice. It allows you to have control over when you begin receiving income, and you are not obligated to annuitize if you don’t want to.

Another type of annuity is the single-premium immediate annuity (SIPA). With this annuity, you invest and must then trigger the income immediately.

This is not the best option for investors when interest rates are low.

It’s very important to make sure you choose a quality company to invest with if you’re thinking of buying an annuity. Do your research, and choose a company that has been around a long time and has a good reputation.

SEP IRA

When deciding on the best investment plan for your retirement, you should consider a SEP IRA if you’re self-employed. For self-employed individuals with no employees, SEPs are an attractive option.

It’s an easy, low-cost plan, and there’s a high contribution limit as well. If you have a good year financially, you’re able to shelter a large sum of money in order to cut your taxes.

And if you have a less than stellar year financially, you aren’t required to contribute at all.

Nonqualified Deferred Plans

There are some people who consider the nonqualified deferred contribution plan (NQDC) to be the best investment plan. This is sometimes described as the “rich man’s Roth.”

Wealthier individuals who cannot benefit from IRAs due to contribution limitations may want to consider this type of savings plan. These plans let you defer part of your income until a later date.

There’s no income tax in the year when you become entitled, and your money grows tax-deferred. The investment potentials are huge.

And there aren’t any contribution or income limits with this type of plan.

Cash Value Insurance

A cash value life insurance plan develops cash value over time. This allows you to take out a loan against the death benefit after you retire. You’re not required to qualify for a loan.

As long as the cash value is there, you can tap into it. There are no taxes to pay on distributions because you’ve already paid the taxes.

This can be a very beneficial plan for stay-at-home spouses because they’re getting both retirement income and life insurance at the same time.

Best Investment Plan: Start Planning Now

One size doesn’t fit all when it comes to retirement savings. As you search for the best investment plan to meet your needs, it’s important to get investment advice from a financial professional.

And the earlier you start planning for retirement, the more money you will have to enjoy those golden years. So do your research, and start saving!

And check out our other helpful blogs too.