There are lots of different options available to you when it comes to investing your retirement money. How do you choose the one that’s right for you?
Fortunately, you don’t have to choose just one tool to help you save money for retirement. In fact, if you have a significant amount of money to invest for retirement, or if you are a high earner and want to save as much of your income for retirement as possible, you will probably want to utilize multiple retirement savings vehicles.
Foundational Retirement Savings Accounts
An Individual Retirement Account (IRA) forms the retirement savings foundation for many Americans. IRAs were introduced in the 1970s as the first government-sponsored, tax-advantaged retirement savings vehicle. IRAs come in two main forms:
• Traditional IRAs — These offer tax-deferred growth and a tax deduction during the year of the contribution for individuals who qualify.
• Roth IRAs — These offer no current tax deduction, but contributions grow tax-free, with no taxes due when the money is withdrawn at retirement. Note that Roth IRA eligibility phases out above certain adjusted gross income (AGI) limits.
The maximum IRA contribution amount in 2013 (for traditional and Roth IRAs combined) is $5,500, or $6,500 if you are 50 years of age or older.
Another type of IRA that has become popular in recent years is a Gold IRA. As the name implies, this IRA holds gold as its primary asset, instead of stocks, bonds and other securities. A wide variety of different kinds of gold investments can be held within a Gold IRA. See below for more details on Gold IRAs.
Beyond IRAs, 401(k)s are the next most-popular retirement savings vehicle. Like IRAs, 401(k)s are also available as either traditional or Roth accounts, with the same tax-deferred and tax-free features. If a 401(k) is offered where you work, you can boost your retirement savings considerably by contributing to it, since the 2013 401(k) contribution limit is $17,500 (or $23,000 if you are 50 years of age or older).
This is especially true if your employer will match your contributions. In fact, matching 401(k) contributions are about the closest thing there is to “free money” and provide a guaranteed return on your investment.
Simplified Employee Pension Plans
Business owners and self-employed individuals can stash even more money away for retirement by opening a Simplified Employee Pension plan (or SEP). The SEP contribution limit in 2013 is 25% of compensation or $51,000 (whichever is less), which can be saved for retirement in addition to your IRA contributions.
Finally, an annuity allows you to max out your retirement savings, as there is no IRS-imposed cap on how much you can contribute to an annuity. Annuities can provide a guaranteed income stream for life, which often makes them a very attractive retirement savings vehicle. There are two main types of annuities: fixed and variable.
A fixed annuity pays a fixed amount of money on a future date, providing a degree of certainty with regard to retirement income. With a variable annuity, the amount of money paid out later will depend on the performance of the sub accounts (investments similar to mutual funds) within the policy that you choose.
If you are willing to stomach some risk in exchange for a potentially higher return, you might opt for a variable annuity. But if safety and security are your main concern, you’re probably better off with a fixed annuity.
Why Gold IRA's are Attractive Now
There are several characteristics of gold as an investment that make Gold IRAs an attractive retirement savings vehicle today. For starters, investing in gold is generally recognized as a long-term “buy and hold” strategy, since gold has historically proven to be a wise long-term investment.
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For example, the price of gold closed at $1,403 per ounce on August 26, 2013, which was up from an average price of $1,225 in 2010 and just $363 a decade ago in 2003.
Also, gold has traditionally been considered to be a good hedge against inflation. While inflation has recently been low by historical standards, many economists are predicting that it could rise in the future when (not if) interest rates start to rise.
Keep in mind that the annual contribution limits for Gold IRA's are the same as they are for traditional and Roth IRAs. So if you have a lot of money to invest for retirement or are a high earner, a gold IRA might be a good retirement savings tool to supplement other vehicles like those discussed here — and thus build up your retirement nest egg even more.
Also, if you currently own gold in any form — gold bullion and coins, gold company stocks and mutual funds, gold futures, etc. — it can easily be rolled over into a Gold IRA. And if you own a traditional IRA or 401(k), these assets can be rolled over into a Gold IRA as well.
There are many potential benefits of Gold IRAs as a retirement tool — especially for wealthy individuals and those with high incomes who want to max out their retirement savings. In today’s uncertain economy and volatile investing environment, you owe it to yourself to carefully investigate these benefits and determine whether a Gold IRA might be the right retirement savings vehicle for you.
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