In many cases, your first step should be to open an Individual Retirement Account (IRA) and contribute as much as allowable each year. Because of the potential for tax-deferred, compounded earnings, IRAs offer similar long-term growth opportunities as employer-sponsored plans. In addition, you may qualify for tax-deductible contributions or tax-free withdrawals, depending on whether you invest in a regular IRA or a Roth IRA.
Another tax-advantaged option to consider is annuities. Generally purchased from a life insurance company, a typical annuity features the potential for tax-deferred growth beginning at some future time (usually retirement). Depending on the type of annuity, you may have several options in how you ultimately take distributions.
Finally, don't forget about traditional investments (e.g., stocks, bonds, mutual funds). Most of these vehicles are taxable, but they can still help you over the long term. The specific types of investments you select will depend on your risk tolerance, time horizons, liquidity needs, and goals for retirement.
A financial professional can help you construct a portfolio that makes sense for you.
Generally, annuity contracts have fees and expenses, limitations, exclusions, holding periods, termination provisions, and terms for keeping the annuity in force. Most annuities have surrender charges that are assessed if the contract owner surrenders the annuity. Withdrawals of annuity earnings are taxed as ordinary income. Withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty. Any guarantees are contingent on the claims-paying ability and financial strength of the issuing insurance company.
Before investing in a mutual fund, carefully consider its investment objectives, risks, fees, and expenses, which are contained in the prospectus available from the fund. Review the prospectus carefully, including the discussion of fund classes and fees and how they apply to you.
If you’d like to discuss how to plan for retirement without employer-sponsored benefits, schedule an appointment with a trusted First Bank Wealth Management team member near you.
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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Prepared by Broadridge Advisor Solutions Copyright 2022.