Looking Over Different Ways of Saving for Retirement

There are different ways to save for retirement. You have to consider different factors like liquidity, profits and tax deference when selecting an appropriate plan for saving for retirement. The options you have for saving are municipal bonds, IRAs, annuities, employer sponsored retirement plans, mutual funds, stocks and real estate investment.

Municipal bonds are given by the government and you receive interest on them when you purchase those bonds. The interest income is a guaranteed steady income as the interest rate is fixed. However, the income received from interest might not be that high as compared to other options. But it involves no risk of losing money and so many people prefer this form of investment.

Annuities are bought from insurance companies which also pay interest on them. this is also like bonds but the money paid to insurance companies is not liquid and do not give access facility for fifteen years after you purchase.

IRAs are very popular form of saving for retirement as they give the facility of growing your savings tax deferred. In traditional IRA, you can contribute your money without paying taxes and so you get an immediate tax saving when you contribute. But when you withdraw you money from the traditional IRA, then your income is liable for tax payment. On the other hand, Roth IRA requires you to contribute your amount after tax payment but the withdrawals do not incur any taxes. Roth IRA gives you the benefit of avoiding all taxes in your retirement, and spend your old age smoothly. Both the IRAs offer you to grow you savings tax deferred for retirement.

The employer sponsored plans, 401(K) plans also offer to grow your savings tax deferred and you get to save and withdraw the money without incurring taxes. They are also a great way to avoid taxes on your income.

Mutual funds are also a great method of saving in which you lend the money to a stock investor who then pays you part of the profit. The mutual fund company receives money from a lot of people so they have a really high amount of money to invest and so generate a high amount of income. This makes mutual funds a very profitable and liquid investment. However, there are no tax benefits with mutual funds and they are considered as ordinary income.

Investing in stock market is the riskiest form of investment. Many people have been lured by the profits they could have earned from stock markets and invested all of their money and lost them all. It is never a good idea to invest all of your money in stock market; instead you should invest only that amount of money which you can afford to lose. Especially, this option should not be used for retirement savings as those savings are all a person has for his future. Hence, an option of investment should be selected which has low risk, high income, availability and liquidity; these factors should be considered when selecting an appropriate method.

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