There are multiple options for those trying to secure a more secure retirement income. The most common types of retirement accounts for those looking to help secure a more stable retirement income are the following:
Tax Deferred Accounts
Tax deferred accounts are one of the most common types of retirement accounts. This includes 401k’s and traditional IRAs. One thing to remember is that all withdrawals from these types of accounts are taxed just like normal income.
These are normal investment accounts. The profits from these investments are taxed at the capital-gains rates. This will vary depending on how long you have owned the investments and what your tax bracket is.
This is another popular retirement account. Withdrawals from a roth IRA are all tax-free as long as it has been open for five years or more and you are 59 1/2 years or older. Depending on your situation one potentially benefit is that you don’t have to take required minimum distributions (RMDs) when you turn 70 1/2.
While this account can provide a decent steady income it also shouldn’t be relied upon because rarely do these provide enough income for you survive. Another thing to note is that social security can be taxed depending on provisional income.
Annuities can be a great way to secure retirement income but they aren’t for everyone. One thing that may sway you is how risky you want to be in retirement. If you are ok with a little more risk you could be better of without an annuity and investing in stocks and bonds. With more risk can come more reward but remember you could easily lose what you invested as well.
Pensions are payments from the government or private companies. These are typically taxable at your regular income rate.
Saving Accounts/CDs/Money Market
These are not really retirement accounts but sadly there are many of you who use them as such. Those of you who sadly haven’t taken advantage of the above mentioned retirement accounts you need to realize that saving accounts/CDs/money market interest and dividends are taxed at your normal income rate.
These are the most popular retirement accounts that are available to those looking for a way to better their retirement income. While all of these types of accounts are available to you it doesn’t mean you have access to every one. For example, you may not have access to a 401k if your work doesn’t provide one. Also, depending on your job you probably don’t have access to a pension. So what does this mean for you?
It means that you should look into your own situation and find what is available to you. While each of these retirement accounts has its own issues depending on your situation they are also better than not doing anything.
If you are already using these accounts and are looking for more then check out some of my other articles talking about self-directed accounts.
Hopefully you are able to gleam some useful information from this. If you have questions about what is the best option for you and your situation I would chat with your accountant or
Author: Nick Barker