2 Great Plans For Retirement Investing To Look Into

Posted on September 26, 2010 @ 1:09 pm

There are a lot of different methods people use in order to prepare for their retirement.  Two plans that everyone should be a part of (if they can) are the 401k and the IRA.  These plans can benefit nearly every individual and will insure that you have money when you retire.

So, what exactly are these plans?  A 401k is a retirement plan that is sponsored by an employer.  Not all employers offer the plan, but if yours does it is worth taking a look at.

When you sign up for the plan money is automatically taken out of your paycheck and invested into your 401k.  The great thing about doing this is that it lowers the amount of taxes that you will have to pay.If your paycheck is for $2,000 and $500 is taken out of it and invested into your 401k then only the remaining $1,500 is looked at as taxable income.

The money that is invested into the plan will be used to invest into different securities and will grow tax free.This allows you to take more advantage of compound interest so that your money can grow even faster.Of course your will eventually have to pay the taxes on it when you take the money out.  Also according to the early 401k withdrawal regulations if you take money out of these plans before you reach the age 59 ½ it means that you will have to pay an early withdrawal fee in addition to taxes.

However the tax free growth that it gives you will make it worth it. The human resources department at the company that you work for will have some more 401k information on the plan your company offers.

IRAs and 401ks are very similar plans.  They have the same benefits and the IRA withdrawal rules as idential to 401ks.One big difference between 401ks and IRAs is that you have control over your IRA plan.You can set up a plan through a third party and invest into it on your spare time. In most cases you can decide where that money will be invested.

Depending on your situation you might be able to invest into both plans. Investing into both can be great for diversification and it can also simply give you more money when retirement comes along.

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