If you’re serious about protecting your retirement savings’ value, the last three years must have been a nightmare. Thankfully, domestic inflation in the U.S. is under control again, and the dollar is once again performing well in the international forex markets. It’s safe to put your money away in a traditional retirement fund.
There are many types of retirement savings options available. Choosing the right one can increase your retirement savings (now that the going is good) and protect them from future shocks. Check out our five picks for the best retirement fund types and find one that works for you.
Individual Retirement Accounts (IRAs) are great retirement funds for people who know how the market works and will earn income up to or past retirement age. You get to manage your own IRA, giving you the freedom to invest with the company of your choice.
You can only contribute amounts equal to what you earn (or less). IRA contributions are tax-deductible, but eventual withdrawals are taxable income.
2. Roth IRAs
Roth IRAs work like regular IRAs, except your contributions aren’t tax-deductible. However, the retirement savings in a Roth IRA can gather money free of tax, and you don’t get taxed on your withdrawals either.
Roth IRAs are the best for people who want to start saving very early in their lives. However, they aren’t ideal for people looking for an early retirement. An early retirement can hinder the cumulative effect of tax-free growth, so you might lose more to tax that way (especially if you’re earning a massive income).
A 401k is the standard retirement fund type you can get through your employer. Self-employed people with registered businesses and no employees can access solo 401ks.
These allow you to defer taxes on your 401k contributions, and though there are 401k contribution limits, they’re great retirement plans when employers match contributions. Withdrawals from 401ks are subject to taxes as well.
4. 403(b) and 457(b)
Working for a non-profit or a tax-exempt organization can make you eligible for a 403(b). 457(b) retirement funds are similar options for state and local government employees. All-in-all, they work the same as 401ks.
Health savings accounts are unique funds meant to cater specifically to your medical bills once you’re retired. You need a high-deductible health plan to qualify.
Contributions to an HSA are tax-deductible, the interest is tax-free, and withdrawals aren’t taxable if they go toward medical expenses. We advise you to pair an HSA with one of the other plans on this list if you can. That way, you don’t dip into fixed income for medical bills in your retirement years.
Alternative Types of Retirement Investments
There are many types of retirement plans available to make your retirement years easier to navigate. The IRA variants are wonderful if you have the know-how to manage your own plan and the ability to choose. If not, a 401k, 403b, or 457b are also brilliant choices.
You can also set aside extra money in an HSA to cover medical bills in your retirement years. Many people diversify their retirement savings further into stocks, retail bonds, ETFs, REITs, and real estate. If you want to learn about these alternative investment options, check out the rest of our investing advice and news now!