Investment Overview

 

Retirement denotes a new beginning. In the US, people are generally living longer and many are enjoying a lively and long post retirement life. Saving and planning for retirement plays a significant role in a person’s life. Even after retirement, this process must continue in order to secure persistent financial safety and freedom.

Why saving is necessary after retirement?

  • Retirement planning is not just for older individuals
  • Social security may not meet all the retirement needs
  • One’s savings need to overcome inflation, the increase in the price of goods and services

What can be the investment options for individuals after retirement?

There’s never been a better time to invest for retirement in an IRA. For increasing contribution limits and catch-up contributions, it has become much easier for the investors to save even more after retirement and as the earnings on IRA account are tax-deferred, the money increases more quickly than in a non-retirement account.

 

The options are:

 

  • Traditional IRA
  • Roth IRA
  • Rollover IRA
  • Custodial IRA

 

Traditional IRA

is an individual retirement account which allows one to save money for retirement and has the earnings develop tax-deferred until withdrawn. Tax is not imposed on contributions in several cases.

 

Roth IRA

allows investors to add to their retirement savings with after-tax money. The advantages of this type of investments are:

  • Federal tax-free growth
  • No mandatory distributions
  • No maximum age limit for getting started

Rollover IRA

means to shift money from a qualified retirement plan such as a 401(k) into an IRA. If one receives a payout from the company-sponsored retirement plan, a rollover IRA could be profitable. The benefits are:

 

  • Provides control of one’s own retirement
  • Keeps savings tax deferred
  • Move the money without tax consequences and penalties

 

The IRA for a teen must be

Custodial IRA

as long as he or she remains a minor and after that they can take on full ownership.

What can be the retirement accounts for employers and sole proprietors?

The options are:

  • SEP IRA
  • SIMPLE IRA
  • 403 (b)(7)

Simplified Employee Pension Individual Retirement Account or

SEP IRA

allows an employer to prepare his retirement planning in to the Traditional IRA and it can be invested as any other IRAs. They are taxed at ordinary income tax rates.

SIMPLE IRA

offers simple as well as non qualified plans like most other plans as 401(k) and it is financed by the pre-tax salary reduction like the 401(k) plan.

 

The tax-deferred retirement plan of

403 (b) (7)

is accessible to the employees of public schools or nonprofit organizations.