If company stock is the only option that is available to you through your company's offered 401 k savings plan, then you should be looking at other types of investment vehicles to handle some of your savings for retirement.
Annuities
When you decide to buy an annuity, what you have to do is to sign a contract in accordance with an insurance company, stipulating what amount of investment you are putting in, as well as whether you are choosing a fixed interest rate or a variable interest rate, what method of payment is being used and also if there are any fees involved.
Fixed interest rate annuities guarantee that you will have a specific, set interest rate for the entire life of the annuity that you purchase.
The interest rates placed on variable rate types of annuities are capable of fluctuating both up and down along with the financial markets.
You can invest in an annuity using a lump sum payment, or if you want to, you can invest gradually over a period of time.
Your earnings are going to grow in a tax deferred manner, but the money that you put into your annuity is not actually going to be tax deductible. What this means is that you are dealing with an investment that is suited best for people that have already taken full advantage of the available tax deductible plans and that still has money left over for the purpose of investing in retirement. It is unlikely that this is going to be the investment vehicle of choice for many younger investors, but you should still be well aware of what it is and what annuities are really all about in case anyone ever tries to sell you one.
IRAs
There are two types of IRAs, Roth IRAs and Traditional IRAs. Traditional IRA contributions can be tax deductible, where Roth IRA contributions are not capable of being tax deductible. The income limits for Roth IRAs tend to be more liberal than traditional IRAs. Another type of IRA is the Simple IRA, which is a Savings Incentive Match Plan for Employees, which is a plan that businesses offer when they have no other type of retirement plan to speak of, and when they are employing less than 100 employees. Just like with 401(k) retirement plans, your earnings and contributions are both tax deferred and you can contribute as much as $7,000 every year. Your employer needs to match either 100 percent of your contributions up to 3% of your salary, or they need to contribute 2 percent of your compensation up to an amount of $3,200.
Another type of IRA is the SEP or Simplified Employee Pension IRA which is similar in nature to the SIMPLE IRA, except that only the employer contributes and not the employee for this type of IRA plan.
Photo Credits: Diorama Sky
Originally posted 2009-08-26 03:36:51. Republished by Blog Post Promoter
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