5 Alternatives to Your Company’s 401(k) Plan

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If you ever asked yourself, “How much should I put in my 401k?” We may have the answer. If your company offers a 401(k) plan, the goal is to max it before you move on to other savings vehicles. However, your company 401(k) plan may not offer the investments you’re really interested in, such as precious metals or green funds. An IRA can be a good choice to expand your savings, especially if your company doesn’t offer a 401(k) plan.

Different Types of IRA’s

There are multiple options if you’re interested in an IRA. To start, you can set up a traditional IRA. These vehicles offer tax benefits now; you can put up to $6,000 a year in a traditional IRA and not pay income tax on those funds now. When you withdraw, you will have to pay taxes on those dollars. However, this is generally less of a hit as your income is lower.

A Roth IRA is made up of post-tax income, so you don’t get a tax break now, but the money you take out is not taxed. Either of these IRAs can be set up for a stay-at-home spouse if you file taxes jointly.

IRA rules are constantly changing and can get tricky. If you’re considering setting up either, or both, talk to your financial advisor about the best path to take for you and your spouse. The penalties for setting these up wrong, and for early or late withdrawals, can be serious. Don’t get stuck with penalties and interest because you lost track of the rules on these.

How does an IRA work?

An IRA or Independent Retirement Account is a private investment vehicle that you can set up either as a solo retirement account in a particular field of investing. It’s a way to grow dollars for use after you turn 59 and 1/2.

An IRA can be started by a private individual in several different formats, but the primary focus is to make sure that you don’t make a permanent withdrawal of funds before the age cut-off. There are limits to how much you can contribute that go up as you age.

Precious Metal IRA

A precious metal IRA is focused on gold, silver and similar products. These retirement vehicles are quite popular as people get closer to 59 and 1/2, simply because they tend to be more stable and grow in an expected manner. Market volatilities generally have little impact on a precious metal IRA.

If you’re considering getting out the stock market in the near future, consider studying up on how to move 401k to gold without penalty. The real trick to rolling any retirement account without penalty is to never actually get the money routed to you personally.

Create your precious metals IRA and determine how you want your contributions assigned for steady growth. Get your 401(k) administrator in contact with your precious metals IRA advisor and make sure that the dollar transfer is managed between the two of them.

This transfer of dollars is critical. The penalties for early 401(k) withdrawal are quite severe. You will be required to pay

  • income taxes for the year on the amount of the payout
  • penalties of up to 10% for early withdrawal
  • administrative fees

Discuss your rollover plans with your 401(k) administrator so you can get this structured correctly and avoid this penalty. Once the check is in your name and in your hand, there is little that you can do to avoid the penalty.

Solo 401(k)

If you have your own business on the side or have a decent side hustle, a solo 401(k) can be a terrific investing vehicle. Your income from your business can be routed to your basic living expenses, and the side hustle dollars can all go into the solo 401(k).

As the owner and your own employee, you can put up to $57,000 in a solo 401(k) for 2020. For small business owners, this is a great way to put a decent amount away for retirement quickly. Shop around; the administrative fees on these can be high.

Real Estate

If you’re close to retirement and not sure about your savings, take a look at your home and consider down-sizing to a duplex or a smaller home. By reducing the footprint of your home, you reduce decorating and utility bills. You can also simplify the load of yard work and maintenance. Finally, duplex owners who live in can carefully monitor renters and keep a careful eye on their real estate investment.

There are many ways to finance your retirement. The days of working until you have a pension check are gone. To protect your future, consider setting up multiple Retirement Vehicles.

Anything else about preparing for retirement.