Investments for retirement planning offer a wide range of opportunities, but plans that will diversify one’s retirement savings can be more specific in that some retirement accounts allow for contributions to be written off on one’s taxes, while others will allow taxes to be avoided once the investor retires and begins making withdrawals. Understandably, investors who choose accounts like a Roth IRA and invest in annuities for their retirement planning needs can benefit from diversifying their retirement plans as investment strategies from 401(k)s to traditional IRAs can offer more benefits when it comes to meeting one’s financial needs after retirement.
Some of the more popular forms of retirement funds are 401(k)s, but Roth IRAs and annuities have also risen to the top when it comes to plans that investors have used. Last year rules were relaxed on Roth IRA conversions which led to many investors changing their current retirement plan into a Roth IRA plan as one of the main draws to a Roth IRA, for instance, is that any earnings that are gained can be withdrawn tax-free and there are no required minimum distributions. Certain types of investment vehicles, like traditional IRAs as an example, do require that the investors start taking payments after reaching a certain age, but investments like a Roth IRA can continue to grow and earnings be withdrawn tax-free.
Yet, annuities, for example, are also being used by many investors because these plans can be set up to pay an individual for a set period of time after they retire or for the rest of their life, which can be helpful in that it could bring a steady form of income well into an investor’s retirement years. Obviously, the size of the annuity will equate to how much an investor receives when a payment plan is set up, but when plans like these are coupled with Roth IRAs, even taxes that may be met on withdrawals from an annuity can be offset with tax-free earnings from another investment, like the Roth IRA.
It goes without saying, that annuities and Roth IRAs are not the only tools that can be used for retirement planning, but advisers still suggests that diversifying retirement savings can be more helpful than simply grouping all of one’s retirement savings into one investment. Sadly, some men and women saw their 401(k) drastically drop during the recession and economic downturn, which has put them in a difficult financial position where they may be working well into their retirement years. While diversifying one’s investment portfolio will not necessarily guard against loss, there are benefits to be gained from doing so as certain types of investment strategies have benefits in areas where others fall short, and acquiring a mixture of these types of retirement plans could greatly benefit an investor when they need financial stability later in life.