Alternative Ways of Saving for Your Retirement

February 5, 2019

Saving up for retirement is the largest financial objective people have to undergo. The sooner someone starts on this journey, the easier it will be for them to get there. Unfortunately, however, many will never reach a point where they can say that they can safely rely on their savings. Over 40% of Americans today don’t even have enough put aside to address a $400 emergency medical bill, let alone retire when they’re 55. 

Common retirement savings plans such as the employer-sponsored 401(k), 403(b), or individual accounts like Roth IRA or Traditional IRA are often the preferred methods. These may not always be readily available or may not hold enough appeal for some. In that case, alternative saving plans and strategies are in order. 

Brokerage Accounts

While the conventional 401(k)s and IRAs offer various deferral and investment options, brokerage accounts provide more investment opportunities. Among these, we have things such as mutual funds, individual stocks, and bonds, certificates of deposit, money market funds, exchange-traded funds, real estate investment trusts, etc. Another benefit of brokerage accounts is that their long-term capital gains tax rate of 20% is lower than other income tax rates. 

Investing in Real Estate

The majority of investors that have 401(k)s or IRAs also have access to real estate investments through their holdings in a mutual fund. A good option for investors is to buy into a fund that invests in real estate investment trusts (REITs). The additional benefit is that these trusts are highly cost-effective, liquid, and productive. In other words, you would gain real estate diversification on a global scale and in a cost-efficient way. 

While on the topic of real estate, there’s also the possibility to buy a multi-family home, live in one section and rent out the other. This way, you’ll be able to reduce your overall living expenses and expedite your mortgage balance. If properly managed, this strategy will help you set aside additional retirement funds. Nevertheless, the upkeep can be quite expensive. 

Pay Yourself First

If you feel that these examples presented here are something beyond your means, you can also opt for the pay yourself first approach. It means that you automatically route specific contributions from each paycheck, the moment they are received. The process of sending your savings contributions into your investments accounts is automated and done immediately. You are then –  paying yourself first. 

The primary benefit of pay yourself first plan is it ensures a continuous contribution to your savings every month. It also removes any temptations of skipping a contribution for other reasons. Some believe that such an automated approach is a must for everyone, regardless of their retirement savings plans.  

Conclusion

Saving for retirement is a lifelong process and should not be pushed aside, no matter the circumstances. The first step in this journey is to eliminate all debts as soon as possible. With smaller or no monthly debt payments, you’ll be much more effective at putting money aside.And when it comes to lending, stay way away from high interest rates. Even if you find yourself in an emergency, take the necessary time to find a lender that will not take advantage of the situation. Illinois Lending Corp is there for you in these types of situations. Sign up here in one click!