Last month, we began our talk about retirement vehicles and the things to consider when deciding on the right method to save towards retirement. We discussed tax liabilities, 401ks, withdrawal limits, and contribution limits. Here are the rest...
The next thing to consider is how much transferability and control you want. This is like the refund/exchange policy for your jacket. In a 401(k) you have very little control and you cannot transfer it unless you switch employers, and if you do; you may lose the match they provided. Additionally, you can only use the investment options your company provides. Roth’s and IRA's you have a lot more control about where and how you invest, as well as you can transfer it very easily.
The last thing to consider is your risk aversion. This is like selecting the style of jacket you want. Do you want to put your money at risk in the market? If this is the only money you are putting away for retirement, can you afford to lose it? In IRA's and ROTH's while generally, people invest in stocks or mutual funds, remember these are only tax codes. You can use whatever investment vehicle you want. (CD's, annuities, bonds, mutual funds, stocks, etc.). In 401(k)’s you are limited to what your company offers you.
Final decision! When making the final decision you have to think about all of the things we talked about earlier and decide what is most important to you
However, when writing this article, I left out an important option to consider... Cash Value Life insurance! Cash Value Life insurance is a powerful tool that can outclass all the other options.
: There are no contribution limits for life insurance!
: Like Roth IRA's, the income you take out is all tax-free!
: There are no early withdrawal limits or penalties, and you choose whether to pay it back or not!
: Life insurance transfers well to your spouse or heirs. Plus, if you feel it is not for you, you can take your money out and put it elsewhere!
: You decide where to allocate your money. Whether that is a guaranteed interest rate, or growth tied to one of the stock market indexes.
: Your principle is 100% guaranteed. Even if the stock-market drops 90% you will never lose a dime!
The best part
: It is self-completing and protects your family! If you die or become disabled, the life insurance will complete the plan for you!
For more information or help to decide which plan is the best for you, call my office today!