The estimated reading time for this post is 4 minutes. This post may contain affiliate links.
The infographic I’m referring to in this post was shared with me by Robert Elway from Rosland Capital. After reviewing it, I thought it would make a great piece to go over and dissect about the road to retirement and all the different paths we can take.
“1/3rd of Americans have no retirement savings.” This is crazy, but believable in our country. Giving, saving, and spending are the three main things we should all be doing in some form with our money.
“Less than 1/4 of Americans believe they have enough money to retire.” This is far scarier since a lot of these people probably are near retirement age already. I know a lot of people with the mantra of “I will save up later on”. I’d rather be building up all along the way.
This info graphic gives three paths to a healthy retirement:
- Personal Accounts
- Employer Sponsored Accounts
- Government Benefits
I am actually hoping to utilize all 3 of these paths in my own retirement, with the least of these hopefully being the government benefits.
Retirement Avenue #1: Personal Accounts
Personal Accounts allow us to save outside of our jobs and still allow us to take advantage of tax-deferred and tax-free growth of our investments. You can do this with mainly:
- Traditional IRA’s: Contributions are tax deductible, lowering your income tax you have to pay now. However, contributions and earnings create taxes upon distribution. So, you are using the money that you would be paying taxes on now to grow your nest egg, but will pay taxes as you take that money out later.
- Roth IRA’s: Contributions are not tax deductible, but, qualified distributions are not taxed. The Roth IRA is only available to people who earn under a certain amount of money though. The nice thing about this account is since you’ve already paid taxes on the money before you contributed, your money is grows tax free for when you withdraw at retirement!
- Tax-Deferred Annuities: Tax-deferred annuities allow people who have reached their IRS contribution limits to save for retirement. Annuities are paid out annually over a specific number of years. Note: I don’t use any annuities in my investment plan.
Retirement Avenue #2: Employer Sponsored Accounts
Employer-sponsored retirement accounts are accounts setup by companies, nonprofit organizations, and government agencies to help their employees save for retirement. Each of these account types have many different variations.
- 401(k): This is a standard retirement account at a company offered in both the Traditional and Roth types. Think tax deferred vs. tax free here. Personally, if my company offers it, I will use the Roth option over the Traditional option every time since my money will grow tax free this way!
- 403(b): This option is used by many schools, churches, nonprofit hospitals, etc for employees and functions just like a 401(k). Again, they can offer both the Traditional and the Roth.
- 457(b): This is a deferred compensation plan state, local governments, and some tax-exempt organizations may offer. This money is available to be withdrawn whenever, which is great news.
SEP and Pension Plans:
- SEP, or Simplified Employee Pension plans are funded by employers who contribute up to 25% of an employee’s pay. Small businesses and self employed people mainly use and create these.
- Pension Plans are rarer then they used to be, since employers have shifted from funding it completely for people to matching employee contributions with a 401(k) and 403(b) plans. This is good for you, the employee because you are not dependent on the company to survive to ensure that you get your retirement pension.
Retirement Avenue #3: Government Programs
Federal and state governments provide some benefits to retired individuals through mandatory programs funded through payroll taxes.
- Social Security: All those years of paying into Social Security and at age 62 you can start receiving retirement checks from the government. There is a lot of speculation as to whether it will be available in the next few generations. I know that with my retirement planning, I am trying to make it so I don’t have to rely on social security hopefully at all in case it’s no longer a benefit in our country.
- Medicare: Medicare provides health insurance to individuals aged 65 or older, who’ve paid in through payroll taxes.
So, there you have it, the many avenues to retirement! What do you think? Are you incorporating different avenues into your path to retirement? Share with me in the comments! A big thanks to Robert Elway from Rosland Capital for the info graphic. Visiting his site, I see that it is focusing more on using precious metals to build wealth. I don’t invest with Rosland Capital. Also, I don’t own any precious metals other than in mutual funds due to diversification of the funds.
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