Paul Haarman says COVID-19 has been causing major disruptions and thanks to its ongoing onslaught, everything right from stock prices to a daily way of life has been dramatically transformed. Under these dire circumstances, it could be pretty challenging to identify your financial goals or even plan for a secure retirement. For the last few months, all of us have been witnessing quite volatile movements dominating the capital markets and that has triggered uncertainty and fear in the minds of investors. As per https://money.usnews.com, there are very few financial goals that are as important as investing for retirement. Retirement planning should be given top priority.
In this context, you must remember that simply because you seem to be a business owner without a well-defined employer-sponsored plan, it does not automatically imply that cannot go about saving for retirement or making a retirement plan. In reality, it implies that you must be more vigilant and disciplined about savings for your future. Saving for your retirement is not rocket science and should not be a nagging or frustrating issue. Follow the smart techniques discussed below and swing into action.
Start by Knowing Your Options
The first important step to take is to clearly understand all the options available to you. While you cannot enjoy a pension plan or an employee-sponsored fund, you have easy access to a plethora of investment products or retirement vehicles just right for self-employed entrepreneurs. Here are some of the popular products for you to examine and choose.
Roth IRA: A Roth IRA allows you to go about investing after-tax money straight into an account that happens to be tax-free upon withdrawal. It is clear that even though you do not receive any tax break now, you could potentially end up saving thousands of dollars during retirement. Maximum contribution for individuals below 50 years of age is $6,000 per year. But in the case you are 50 or above, the maximum contribution is $7,000 per year for 2020.
Traditional IRA: We know that a Traditional IRA follows exactly the same regulations and contribution restrictions as Roth IRA; however, it uses pre-tax money. This implies that you could reduce your overall tax bill right in the very contributing year itself, but you are obligated to be taxed at the time of withdrawal. Maximum contribution for individuals below 50 years of age is $6,000 per year. But in the case you are 50 or above, the maximum contribution is $7,000 per year for 2020.
Solo 401(k): We know that IRAs are certainly the simplest and easiest and hassle-free method of investment for entrepreneurs. If you wish to put in more than the pre-determined $6,000 per year, you must consider a Solo 401(k). This plan is valid for owners of small businesses that have no full-time employees. Solo (k) lets you contribute a maximum of $ 57,000 in 2020 provided you are below 50 years of age. You may contribute a maximum of $63,500 in 2020 in the event; you are 50 years of age or above.
There are some other retirement products but it is best to initiate with simple and easy retirement plans.
Focus on Getting Slow and Steady Victories
According to Albert Einstein, compound interest seems to be the most robust and powerful force that exists in the universe. You couldn’t agree more. Thanks to the benefit of compounding interest. You do not necessarily have to invest a tremendous amount of money for becoming wealthy at the time of retirement. Instead, you could reap the benefits of a slow and consistent climb. The earlier you start planning your retirement plan and saving for it. The more you could take advantage of compounding interest. We know that this is the interest that is calculated basically on the starting principal plus accumulated interest accrued during the previous periods.
Do not use your retirement account before your retirement. You may be quite tempted at times to withdraw money from your retirement account. But make it a point to stay away from your retirement fund. Let it grow and enjoy the benefits of retirement.