These days, it feels more important than ever to start saving early for retirement. While there are all sorts of news outlets and blogs that tell us about this, today we would like to throw our hat in the ring and make note that some strategies are a lot more viable than others. At the end of the day, it is important to remember that retirement is incredibly expensive.
Most estimates note that we need millions of dollars to comfortably retire, in this day and age. That is thanks to how long people live as well as the general price hike of just about everything. Inflation rates have meant that the cost of living has increased exponentially since the days when government-sponsored assistance for retirement was created.
Now, it is hardly a secret that there are in fact federal programs that are designed to help us with our retirement. There’s more information on it here: https://www.cbpp.org/research/social-security/top-ten-facts-about-social-security, but almost everyone has at least some inkling of what it is and how it works. We pay for it through our taxes for decades and finally get to reap the benefits once we retire.
Unfortunately, Social Security alone is not enough to sustain most people through their retirements, especially if they live well into their eighties and nineties. That is why additional methods to prepare for this part of our lives have become so popular! There are a few other types of “traditional” options such as pensions. 401(k)s, but it is worth noting that pensions in particular are not as popular as they used to be.
Understanding Retirement Investing
Before we delve too deeply into individual retirement arrangements (IRAs) in specific, let us explore the world of retirement investing. There are a lot of options, after all, and a lot of us are left perpetually wondering what the “right” call to make is. Just remember, this is not a replacement for official financial advice – consider talking to an advisor if you are not certain about anything in your own accounts.
Typically, this type of saving or investing is just known as retirement planning, so there is a good chance you are already familiar with it, at least to an extent. The idea is that you will want to set goals early on and then do your best to achieve them. Over time, your goals will likely evolve as things across the world change as well.
There are all sorts of strategies out there for achieving these things, and each of them has its own pros and cons of course. As far as setting goals, try to set both long-term ones and short-term ones. This way, you will not get discouraged by the immense scope of a long-term goal like trying to save millions of dollars.
Let us face it, for many of us out there, that prospect can feel unattainable. It can make us feel like we may as well not even bother with saving. However, if we break things down into monthly or even annual figures, it can suddenly seem much less intimidating. Consider that sort of strategy if planning feels otherwise out of reach.
What are Individual Retirement Arrangements?
Now that you have a better idea of what retirement planning is as a whole, we can instead focus on individual retirement arrangements. We have alluded to this already, but there are several types of IRAs to be aware of. Putting it simply, an IRA is a type of savings account. that comes with certain tax benefits depending on the type as well as your own personal circumstances.
There is more about that on this page if you would like a comprehensive look at them. What is most important is to consider the pros and cons of each of them. Additionally, you are not necessarily limited to only one total.
What you will be limited to is your annual contributions. This is true no matter what type of IRA you open, so we will cover it here. The numbers fluctuate between years, but for 2023, the max contribution for those under fifty-five is six-thousand, five hundred dollars (or an equivalent asset worth that much). Just keep that in mind as you consider which to open.
Additionally, opening them is rather simple. Just look for financial institutions that offer them – it could be a bank, a credit union, or an online lender. Explore your options!
Traditional IRAs
These are the types of IRAs that many consumers end up with. There are a few reasons for this. For one thing, our annual contributions to them are tax deductible. This is a pretty nice perk, of course.
The other bit is that with the traditional ones, any money we deposit is tax deferred until we withdraw from the account later on. Whatever your current tax bracket is will not impact the savings, then – it will be the bracket you land in once you retire. Typically, many people end up in a lower bracket once they retire, so the traditional ones are the way to go.
Roth IRAs
Simply put, these are the inverse of the above in terms of the tax deferment. You see, with a Roth IRA, you will pay the taxes upfront on deposits. Then, once you withdraw, you will not owe anything. If you think you will be in a higher bracket once you retire, then this will probably be something to consider.
Self-Directed IRAs
For anyone out there who wants to begin a gold IRA, then what you’ll really be doing is starting a self-directed one. The other types of individual retirement arrangements do not allow for much flexibility in terms of the assets that get deposited. Self-directed ones are quite different in that sense.
Many people planning for their golden years have a self-directed IRA, specifically with the purpose of making it a gold or precious metals IRA. As you have probably guessed, there are a ton of reasons for that, and we will be diving into them later. For now, let us focus on logistics.
Their name implies it, but the self-directed variety gives us as the account holder much more control. If this is intimidating for you, do not forget that you can ask for help from a broker or a financial advisor to manage the account. Again, the draw here is flexibility.
Why Gold and Precious Metals?
Something that might stick out to you as being a bit strange is how popular gold is for retirement planning. Why is that? A lot of it comes down to the historical trends surrounding this metal and the rest of the “precious” ones (silver, platinum, and palladium).
Over long stretches of time, gold does not lose its value. Compare that to the value of the United States dollar and you will see that bullion is safer as far as retaining your original investment. While it may not necessarily gain much, it does not lose it either – that is what makes it so appealing.
Anyone who gets nervous about inflation rates decreasing what they have in their savings may want to consider investing in gold as well to store their wealth. Gold has been valuable since the moment it was discovered – there is not really a big chance that this will change any time soon.
In fact, we still see annual surges in gold prices. Based on all of that, you can start to see why it has become such a popular option. Although the prospect of a self-directed IRA can be intimidating, the fact that we can get help with them and retain the value of the money we invest is appealing to a lot of folks.
Are These Types of IRAs Worth it?
The final question we are looking at today is this one: are they actually worth it? Obviously, it will really depend on your circumstances. If you have no interest in gold investing and you do not plan to get bullion any time soon, then a gold IRA probably would be a waste.
However, if you already have bullion or are planning on purchasing some soon, or you have a collection of coins that have high enough raw gold content, then you would likely find some benefits in an individual retirement arrangement catered specifically to that purpose. Many of the tax bonuses that come with traditional, or Roth ones also apply here – just ask about them if you are not certain.
Overall, it is a good idea to check with your financial advisor before you make a firm decision. Still, it is critical to start planning for retirement as soon as you can.
