Alternatives to Social Security: Annuities
High returns, tax-deferred interests until withdrawal and flexibility are the three top “USPs” (or, Unique Selling Points) of annuities. With annuities, you can boost your retirement earnings as you receive a specific amount every year, every half-year or every month, either for life or for a fixed number of years. All you need to do is to make an investment either in a single lump sum or through instalments paid over a certain number of years. There are very few alternatives to social security that provide an income as high as annuities.
There are three major types of annuities, which you can consider as alternatives to Social Security –
- Fixed Annuities
- Variable Annuities
- Bonus Annuities
If you want to learn more about annuities, we suggest that you check our section on “Annuities.”
Investment Income: Stocks, Bonds, Mutual Funds
Your investment income can come from various investment assets like bonds, stocks, mutual funds, loans and other investments. All these are some of the best alternatives to Social Security. Stocks are investments in individual businesses. Bonds are investments in debt that can earn interest. Mutual funds are ‘open-ended’ funds run by investment companies, which raise money from their shareholders and invest in a group of assets. Properly dividing your assets among different types of investments is the key to surviving through varying economic conditions.
There are three important factors that you should consider before you plan your asset allocation:
- Investing goals
- Risk tolerance
- Time horizons
If you want to learn more about retirement planning and investment incomes, you may check our section on “Retirement Planning-Investment Income.”
Pre–tax versus post-tax plans
It is important to decide whether you want to invest in a Pre–tax or a post-tax plan. With a Pre–tax plan, the contributions are taken from Pre–tax salary, and the funds grow tax-free until withdrawn. With a Pre–tax plan like 401(k) the amount of your taxable income is also reduced. A post-tax plan like Roth 401(k) can be a better option for you, if you are in a higher-income tax bracket when you retire.
You will find more details at our section on, “Pre–tax versus Post-Tax Plans”
More Information on Retirement Plans
In case you want to learn more about the various retirement plans that are available, we suggest that you visit the United States government Internal Revenue Service (IRS) website at, http://www.irs.gov/retirement/article/0,,id=178060,00.html