Retirement Investing

For most of us, retirement is something to look forward to - time when we will be able to do what we like, when we like it. Unfortunately, as it nears, for most, finances become an area of concern. Few of us are millionaires - most have to count on an IRA, 401k, or - god forbid - Social Security.

Retirement finances need not be a problem though, if we start saving early enough. The more time remains to the retirement date, the less capital we need, and the lesser rate of return is necessary to achieve financial comfort. We discuss time and capital interdependence in the following pages - click here to read about the key to wealth.

The 2 preferred tax advantaged vehicles for retirement investing are Individual Retirement Accounts (IRA), and 401k employer sponsored plans. They differ in the contribution limits - IRA limit is $5000 per year, while 401k limit is $15500 per year. They also differ in the choice of investment vehicles - employer plans are limited to the vehicles chosen by the employer.
But they have key similarities - both allow investments to grow tax free until they are taken out at retirement. Even then, depending on whether it's a Traditional or Roth plan, tax treatment differs. Click here to read more about IRAs.
401k allows a lot more money to be accumulated quickly, but usually suffers from mediocre returns and high fees - however, there are ways of dealing with both. Click here for details about 401k strategies.

There are of course other vehicles, some, like real estate, carry tax advantages. For example, if you invested in rental properties (with a positive cash flow) - buying only one property per year for 20 years - chances are, your retirement would be pretty comfortable. On the flip side, real estate investments are more complicated than simply opening a brokerage account or a mutual fund account. That's why majority of us invest in the stock market - it's easier to do (though not necessarily easier to make money). As we mentioned before, the most important step is to start NOW. Do not wait - start today. Talk to a financial planner, ask your accountant about details of tax advantaged investing, skip an expensive dinner at a restaurant and put the money in your retirement account - get the help from professionals and start now. If you are already saving for retirement - try to save more. You can always take it out if money is really needed. But have the money available. Time is of essence - the more time you have, the more money you can have at retirement - put time to work on your side TODAY.



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