Last updated on March 17th, 2024 at 11:48 am
When you’re close to retirement, it’s time to start thinking about your finances. If you don’t take the time to plan ahead, it can be easy for your expenses to exceed your income in retirement.
In this article, let’s discuss some factors you should consider when choosing a suitable retirement plan for yourself or for your employees at work as there are many types of retirement accounts.
Determine your needs
Before you start looking at retirement plans, it’s important to figure out what you want from your retirement. The “what” depends on your needs and goals. Do you want to retire early? Is there a particular goal that matters more than others? It’s helpful to define these needs before starting on a solution because it will help determine which options are best for you.
Think about the things that matter most to you in life right now. Maybe it’s taking care of your family or being able to travel around the world while still being able to afford necessities like food and shelter.
These are examples of tangible fitness goals that could be achieved within 3-6 months with minimal planning and effort—and they’ll make the rest of your life easier too!
Seek financial advice
The right retirement plan can be a great asset to you and your family. To ensure this, it is essential to seek financial advice in choosing a suitable one. You can find a financial adviser on your own or through your employer.
A financial advisor is an investment professional who helps you plan for retirement or wealth management. They are trained in the best practices of investing and have access to various investment products that may suit your needs best.
Understand the pros and cons of different retirement plans
- 401(k)s are funded with pre-tax dollars, but withdrawals are taxable.
- IRAs are funded with pre-tax dollars, but withdrawals are taxable.
- Roth IRAs are funded with after-tax dollars, but withdrawals can be tax-free if you meet certain requirements.
The most obvious difference between these plans is that a 401(k) is typically associated with an employer, while an IRA is available to anyone who wishes to set one up for themselves or their spouse.
Although there’s some overlap between the types of investments you can have in each account type (i.e., mutual funds), there are also some unique features that you’ll explore below:
Talk to your employer about possible retirement benefits
The first step to selecting the right retirement plan is to talk to your employer. This can be done through a private consultation or by attending a workshop hosted by your HR department. Your employer will be able to provide you with information on the different benefits available, as well as advice on which one would best suit your needs.
As per SoFi professionals, “Retirement plans often have tax advantages as compared to saving within a “regular” savings account or investing with a brokerage account. There can be other benefits to using a retirement account—such as an employer match in a 401(k)—but really, it’s the tax benefits that make them unique.”
You should not be afraid to ask questions about your retirement plan. Your employer, financial advisor and tax adviser should be able to answer any questions you have.
Asking questions is important because it helps you understand what benefits are available and what steps need to be taken in order to qualify for them.
