Ensuring you're prepared for retirement requires you to utilize the capital you have wisely. Placing it in the stock market isn't the only option you have to grow your wealth. Investment vehicles, such as IRAs or a 401(k), can help you accumulate the funds you need to enjoy your post-career years.
401(k)
Using a 401(k) to help plan for retirement allows part of your paycheck to go toward funding this type of investment account regularly. Receiving automatic contributions from your salary makes it an efficient way to build value. You can control the contribution levels and usually take this account with you if you change jobs.
Traditional IRA
If you use a traditional IRA, you can contribute after-tax or pre tax dollars. At the age of 72 or 70 1/2, you're required to start taking distributions. One of the benefits of using an IRA is the tax-free growth you can receive. Unlike investing in the stock market, you won't have to pay any tax on the capital gains or dividends that your investments earn until they are distributed to you during retirement.
Roth IRA
Adding a Roth IRA to your portfolio is another way to diversify your funds. The most significant difference with this account and a traditional IRA is how your funds are taxed. When you withdraw funds from a Roth IRA, the money you receive will not be taxed. Also, there are income limitations, and you can only fund a Roth IRA with after-tax dollars, which means your contributions are not tax-deductible.
Self-Directed IRA
Deciding to use a self-directed IRA lets you put non-traditional assets to work. Traditional and Roth IRAs are limited to investment vehicles like stocks, bonds, ETFs or mutual funds. Using a self-directed IRA allows you to invest in real estate, precious metals, cryptocurrencies and private businesses. One of the most popular options people choose to invest in with a self-directed IRA is precious metals. These include metals like gold, silver and platinum.
Gold IRAs
Opening a gold IRA is usually done when you want to focus on acquiring physical precious metals. You're able to purchase eligible gold bars and coins that meet IRS regulations and place them in this account. You can also invest in silver or platinum bullion coins and bars that meet specific criteria. If you already have a 401(k), traditional or Roth IRA, you can roll these types of accounts over to assist with funding. It is important to note, according to the experts at Goldco, “If you're rolling over funds from a Roth account, you'll need to set up a Roth gold IRA.” When you start gold IRA investing, adding physical precious metals to your portfolio can act as a hedge against inflation and combat periods when economic conditions are showing signs of trouble.
Having a diverse portfolio that includes various investment vehicles should help ensure that your funds aren't subjected to wild swings when the stock market becomes volatile. Choosing to include non-traditional assets, such as gold, or take advantage of specific tax rules to help grow pretax dollars even larger can be advantageous in the long-term.
