Whether you are saving up for your golden years or you are now entering retirement, where you choose to park your money will determine a great deal about your financial present and future. What are your options? Let’s go over some ideas for parking your money conveniently, securely, and profitably for retirement.
Employer Retirement Accounts
Are you a traditional employee? While saving up for your retirement, it usually makes sense to park your money in a 401(k) or 403(b) retirement account when the option is available. This allows you to grow your savings while deferring taxes, leading to potentially higher gains than you would be able to achieve otherwise.
These types of accounts protect your savings from creditors and sometimes even tax liens. If you are lucky, your employer may also agree to match your contributions. This can help you grow your savings for retirement even more rapidly.
Individual Retirement Accounts
If you prefer, you can park your money for retirement in an IRA instead of a 401(k) or other employer-sponsored plan. This is an excellent option for self-employed people and business owners.
So what happens if you max out your 401(k) or IRA contributions and still have more money to park for retirement? At this point, you may want to consider investing in assets such as stocks or real estate. A mutual fund is a great option to start with if you are new to investing. Diversification is excellent, it is a “hands-off” investment option, and you can decide what level of risk you are willing to take on.
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Health Savings Accounts
If there is one thing you can count on in life, it is health issues. And as you know, taking care of your health can be expensive even with relatively minor problems. With a health savings account (HSA), you can save toward health expenses with tax-free contributions. You’ll only pay taxes when you pull from the HSA if you use the money for something other than healthcare.
High-Yield Bank Accounts
Looking to keep your retirement savings liquid? Consider a high-yield bank account. This type of account provides you with interest similar to what you would get from a CD, but you can withdraw at any point without consequence. These types of accounts usually are available from online banks with low overhead.
Certificates of Deposit (CDs)
CDs are still an option worth considering as well. The longer you are willing to store your money in a CD, the higher the interest yield can be. Just be aware that there is a penalty for early withdrawal.
Treasury Notes and Bonds
Good old-fashioned treasury notes are still available to individuals who are looking for safe, stable investments leading up to or during retirement. You will not pay state or local taxes for a treasury note, nor are there any commissions.
As an alternative to treasury notes, you can invest in bonds. These can include federally-backed I bonds (like treasury notes, these are not subject to state or local taxes), municipal bonds, corporate bonds and bond funds.
With an annuity, you take some portion of your savings and pay it to a company that will issue annuity instalments in return. You can pay in instalments or you can pay as a lump sum when you set up the annuity.
Need Advice for How to Park Your Retirement Money?
If you are not sure where to park your money for retirement, we can connect you to a financial advisor who can provide you with personalized advice based on your specific situation.