Most financial professionals suggest that saving at least 15% of your monthly income is one of the best ways to save for retirement. For some employees, investing for retirement is done through a 401(k) plan with their employer and some open an IRA account. These two options are good ways to start a retirement plan. However, some people think these are not enough to cover them for retirement. Find out more about this story from Madison.com.
4 Best Ways to Save for Retirement Aside from Your IRA
If you don’t have access to a 401(k) plan through your employer, then the obvious way to save for retirement is to use an IRA. IRAs are a great option, but they have one rather serious drawback compared to 401(k)s: the annual contribution limit is much lower.
Opening an IRA is a great option to invest for your retirement, but the downside is its limited annual contribution requirement. In 2017, the contribution limit is only $5,500 with an additional $1,000 contribution for individuals at least 50 years old. As a result, people are searching for other options to save more money for their retirement.
Retirement Savings Options
Aside from the traditional 401(k) plan and IRA accounts, you can now make use of additional saving platforms. One of the most popular options is opening a health savings account (HSA). Similar to an IRA account, the money contributed to your HSA account is tax deductible, and you can claim this as tax-free upon withdrawal provided that you use it as a qualified medical expense. The current annual contribution limit to an HSA account is $3,400.
Another program available is through a Spousal IRA. This program is designed for married couples to maximize on the IRA contribution limit. One cannot contribute more to their IRA than their earned income. If your earned income is less than the $5,500 limit, your spouse can contribute the remaining without affecting their own limit. This has the same rules as a normal IRA account including the contribution limit of $5,500 but a joint tax return is an additional requirement.
A deferred annuity can also be one of the best ways to save for retirement. You will not receive the proceeds of a deferred annuity until a future date. Deferred income annuity can be the best choice if you are not in a hurry to receive the proceeds because the longer you delay the receipt of money, the higher amount you will receive (assuming your investments continue to increase in value). The interest rate of a deferred annuity is based on the current rate of the time of purchase.
The standard brokerage account is another option if you want to go long-term. This investment option allows you to buy municipal bonds, treasury securities, and high-dividend stocks. Aside from getting attractive tax benefits from investing through this account, it also provides a great source of extra income that you can reap when you retire.
Investing for Your Future
To achieve a happy and fulfilling retirement, you need to save as early and as much as you can. Therefore, it is important to have a clear retirement plan on how to get there financially. You can start by determining your retirement budget and from there try to consider as many options as you can. These saving programs are great investments to save for retirement. Be sure to make the wisest decisions to ensure you will have a peaceful mind when the time of your retirement comes.
Do you know of any other ways to save for retirement after maxing out your IRA? Share your thoughts with us in the comments section below.