Diversification Is Key – So Is Due Diligence On Your Part

The majority of those with Retirement Accounts have IRA accounts of some description. Those IRA’s are ‘In the market’ …… as “In the Stock Market”.  And the stock market is not for everyone.  It can be extremely volatile, and if you’re going to stress out every day as the market has its’ upswings and downturns, maybe it isn’t for you.  That said, you can choose any 10 year period in the past and although the market has surges, both up and down, and you may lose part of your principal off and on throughout, it has gained the owner more than any other Retirement ‘vehicle’.  It’s not guaranteed, and when withdrawals begin, so do payments to Uncle Sam.

Annuities are issued by Insurance Companies.  They are a contract, and have a maturity date of from 10 years and up.  It’s best to leave the initial deposit there to grow to maturity, but you can usually withdraw up to 10% per year without penalty.  If you close it out before maturity, there is a substantial penalty called a surrender charge.  You can choose a fixed or variable interest rate, set by the company.  A fixed (guaranteed) rate, is usually low (below market value) but still may be a better choice over the variable.  With annuities, you don’t lose your principal, but there are large commissions to pay at time of purchase.  At the time of withdrawal, taxes are paid on the interest received.  Ask questions and understand fully before you sign on.

Traditional vs Roth IRA’s have advantages as well as income restrictions (each having their own).  There is a significant annual contribution advantage between the two. With Roth, both state and federal taxes are made at the time of contributions and grow on an after-tax basis, meaning it grows tax-free.  One can be passed on to beneficiaries and then put in their name can be carried on and added to as their own.  One is not an RMD account and the other is – meaning you are required to have withdrawals made beginning at age 72, or you will be steeply penalized.  They are definitely worth looking into, and learning about the advantages and restrictions of each.  Inquire – find which would work for you, or diversify, adding to both.

CD’s are another way of saving, and although the interest rates are on the low side, your money is insured by the FDIC up to $250,000.00, per account, so you wouldn’t lose any of it. You will pay taxes on any interest earned upon withdrawal. There are maturity dates and ‘interest lost’ penalties if withdrawn before it matures.  Ask and understand all the rules before you sign.

It boils down to choice and your ability to handle a volatile account as opposed to one that’s stable.  Do your own due diligence.  Speak to a few Financial Advisers to understand better all there is to learn about each.  Choose an Adviser who is a Fiduciary… he/she works in your favor. Be comfortable with your choices.  Diversification is key (don’t put all your eggs in one basket).