Some of the more common types of investment vehicles which individuals have used for retirement planning are Roth IRAs and annuity plans, which can offer a variety of benefits for those who are saving for retirement and want to diversify their retirement funds in the hopes of earning more overall. Different types of retirement plans may even require that taxes be paid upon withdrawal or will not allow an investor to write off taxes on contributions at the present time, but some plans allow earnings to be withdrawn tax-free.
For this reason, options like a Roth IRA and annuities are some of the more popular types of retirement accounts, outside of plans like a 401(k), as they both offer benefits to investors when it comes to having a safety net in their personal finances later in life. Obviously, the Roth IRA has been in the news over the past months as opportunities to convert to a Roth IRA account has offered investors the opportunity to extend paying taxes on this conversion for two years, simply meaning that an investor who does convert to a Roth IRA can spread out the taxes that they must pay over this two year timeframe.
Yet, annuities are also a popular retirement investment vehicle because they also offer advantages which, when coupled with another retirement plan, can be helpful in diversifying one’s retirement portfolio. Typically, annuities are seen as an excellent choice by many investors due to the fact that they can provide a stable source of income for individuals who are retired as the earnings from an annuity can be paid out either over a set period of time in intervals or simply until an investor passes away.
Obviously, the amount of payments and timeframe will depend on how much an investor gets during each payout, but when coupled with retirement plans like a Roth IRA, annuities and other retirement accounts can provide security for those who are saving for life after work at the present time. While a Roth IRA can offer the option of having earnings withdrawn tax-free, there are typically taxes that must be paid on annuities once payouts began. However, one of the benefits of an annuity is that there no limits for the annual amount one can contribute and this may allow some investors the option of saving a large nest egg for when they retire.
However, advisers often counsel investors who are looking for opportunities to diversify their retirement portfolio to do their research to see what the costs for their personal situation may be in terms of saving for retirement, fees that may be levied with these retirement accounts, and depending upon one’s position in life and how near they are to retirement, certain types of retirement investing may not be in their best interest. Obviously, Roth IRAs and annuities do provide options that can be beneficial for those who are planning their retirement, but they are not going to be in every investor’s best interest and researching the pros and cons of these investment options as they will affect one’s retirement plans and personal finances will be needed before an investor jumps into one of these retirement accounts.