Everyone would want to have a peaceful time when they retire from work. You don’t want to struggle at your senior age to struggle with issues related to finance. That’s why it is important to have an effective retirement plan while you are still strong and working.
Some people make the mistake of waiting too long before they start thinking about retirement plans. This is a problem that’s usually common among people who are not formally employed. It is always good to start thinking about a proper retirement plan at an early age.
The good thing is that there are several companies that specialize in providing retirement plans to different types of people across the country. All you have to do is to identify a company that can offer a financial or incensement plan that suits your needs.
Although they have become unpopular, being in a pension scheme is probably one of the most effective retirement plans you can have. One advantage of pensions is that it requires little effort from you. It is the employer who makes the contribution on behalf of the employee.
Most government employees have this form of retirement plan since it’s a requirement. However, one disadvantage of a pension plan is the lack of Cost-Of-Living adjustments. This means that your pension money will be the same every year regardless of the state of the economy.
Defined contribution plans
Most employers today offer defined-contribution plans to their employees. There are four different types of defined contribution plans. They include 401k, 403b, TSP and 457. If you choose to get involved with a defined plan contribution plan, then it’s important to choose a plan option that caters to your needs. Employers who have defined contribution plans also pride matched contributions.
As an employee, it is important to ensure you understand how a defined contribution plan works in order to choose the best option for you. Some employers tend to force certain plans on people – options that might not really benefit them a lot during retirement.
Guaranteed Income Annuities
A guaranteed income annuity offers guaranteed income when a person retires. With this retirement plan, a person is required to purchase a fixed monthly payment for retirement. Income payments can be taken as frequently as monthly or quarterly. Guaranteed income annuities should be carefully considered in order to get maximum benefits.
You should, for example, seek the services of a financial planner Hobart to advise you on the best company to invest your money. Single-premium Immediate Annuity gives one an opportunity to invest and take immediate income payments. On the other hand, the Deferred income annuity (DIA) is considered more flexible because you are given the liberty to choose when to start making the income payments.
Real estate is another super effective retirement plan. This will, however, be possible for those people who don’t mind the worth that comes with it. It is a good plan for people haven’t saved much money and their retirement age is quickly approaching.
You should be able to get a good financial planner to take you through the whole process. Although the initial capital is slightly higher compared to other investment plans, real estate can offer great benefits if the project becomes successful.
Cash-value life insurance plan
Most financial planners advise their clients to opt for this retirement plan because of its ability to accumulate value in the tax-free vehicle. Purchasing a cash value life insurance plan offers you an opportunity to take a loan against your death benefit that can still serve as income during your retirement.
For instance, a policy worth $500,000 could offer you a loan of $250,000 and can be issued at once or through several withdrawals. The loan is usually repaid from your death benefits – leaving your beneficiary or kin with $250,000. The advantage of it is that the loan is tax-free.
In general, planning for your retirement is one of the most important things. It is always difficult to realize this until you reach that time (when it’s already late). Do not wait until it’s too late before you start planning for your retirement. The earlier you start, the better it will be for you and your family.
Eric Reyes is a passionate thought leader having been featured in 50 distinguished online and offline platforms. His passion and knowledge in Finance and Business made him a sought after contributor providing valuable insights to his readers. You can find him reading a book and discussing current events in his spare time.