Saving for retirement is one of the best and easiest ways that anyone can set themselves up for receiving tons of passive income in the future.
Retirement planning isn’t necessarily hard; but it can be what you make of it. In order to make the right choice when it comes to your investment options, you need to have a basic understanding of all the factors and selections that are available to you.
There are many ways to start saving for your retirement. Some of them can produce very exciting returns. But not all of them are the safest options to choose from.
In the U.S., there are two basic types of retirement funds that people go with because they are the most popular and can be easily customized.
If you don’t know how these types of accounts work, then you could find yourself in a lot of trouble. The two types of accounts for retirement that are most popular are the 401k account and the IRA (Individual Retirement Arrangement).
The Basics of the 401k
A 401k is one of the most popular types of employer sponsored retirement plans available today.
A 401k is a retirement plan offered by the company you work for where you get to make tax-sheltered contributions to it every paycheck. Tax sheltering is VERY important because you’re effectively saving yourself from paying the government 25% of your money, and putting it into your (future) pocket instead.
When saving using a 401k, you’re investing in mutual funds made up of stocks and bonds. Those funds will compound and grow over the years to levels far and beyond anything you could have saved on your own.
Once your 401k reaches a level where you can withdraw approximately 4% for your living expenses, you are ready to retire. In essence, you’ve created a never-ending stream of passive income for the rest of your life!
The Basics of an IRA
An IRA is an account that differs from a 401k in that it is set up at a private bank or financial organization (like Vanguard or Fidelity).
It does not have to be an account provided to you by an employer. This is one of the most popular options because it allows you to have a retirement savings account independent of where you work and free of how long you have been working.
In other aspects, an IRA works the same as a 401k does by deferring your taxes until you withdraw money from your account. The perks of this is that you will end up paying less taxes after you retire, meaning that you save quite a bit. There are different forms of IRAs out there. But one that almost no one ever considers are the benefits of a precious metal IRA.
What is a Precious Metal IRA?
A precious metals IRA is one where you buy gold or silver in physical assets with the monetary value in the IRA.
You might ask yourself “Is investing in gold a good retirement strategy?” The answer is yes, to a degree. Though you’d never want to make this 100% of your retirement savings, precious metals have been proven throughout investment history to be an important component of any diversified portfolio. As a matter of fact, here are 5 good reasons why you’d want to invest in gold.
In addition to having the normal benefits associated with a retirement account, a gold or silver IRA is also able to provide the user with a much higher level of security.
IRA’s of this type are owned to the fact that the value of metals remains consistent through the ups and downs of the economy. While stocks or bonds may be cyclical in nature, precious metals tend to be more consistent and better at holding their value.
No matter what you choose, whether its gold or silver, IRA or 401k, it is always recommended that you start saving up for your future right now. A little bit of savings can easily compound throughout the years into a fortune that will easily provide you with residual income for the rest of your life. All it takes is to start saving now and stick to it.
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