Creating the best retirement investments for your 401k retirement savings can be challenging because there is no one investment that can be considered as the best. My best retirement investment strategy can be very different from your best retirement investments. That’s why I think there is no such thing as the best retirement investments that we can all agree on. However, it is important to understand the different options you have when it comes to building your personal very best retirement investments for your 401K and/or Individual Retirement Account (IRA).
Immediate annuities definition states “a form of insurance or investment entitling the investor to a series of annual sums”. To some retirees, buying an annuity is the best retirement investment. Immediate Annuity are very similar to the pension plans where you receive guaranteed income until your death. You can even set it up so that you or your spouse receive guaranteed income for life. To some people, immediate annuity is like purchasing an insurance that provides a constant stream of income, which is exactly what you need if you are a retiree. However, you do have to release a lump sum to the insurance company, who will have complete control over and you will never get it back in exchange for the annual income for life. Immediate Annuity can be the best retirement investment strategy if you need a guaranteed income or if you are the one who has difficulty in saving (spends money too fast) or if you are projecting to live a long life. People like me, who is expecting some pension income and/or Social Security income, will most likely stay away from any form of immediate annuities.
Rental Real Estate
Rental property can be considered the best retirement investment. Many people turn to real estate and turning into a rental property because it can, similar to annuities, provide a stable source of income during your retirement. However, you need to expect to be involved with maintenance of the property and to run into unexpected expenses especially related to repairs or replacement. I think to be successful with rental real estate as your best retirement investment, the rental income must be about 20% greater than the mortgage including property tax and home insurance. For example, if your mortgage, tax and insurance included, is $1800, then your rental income should be about $2160. Beware that renting out a property is an investment where the property value can go up or down. Therefore, you really need to put the time in learning prior to adding rental real estate to your best retirement investments list. I currently have some experience with rental property as I have been doing it for past six years. I am always willing to help you so feel free to send me questions. If I cannot answer or guide you in the right direction, then I have a very close friend who is a successful realtor that I can leverage on.
Retirement Income Funds
Retirement income funds are a great option for your retirement strategy and to me it is the best retirement investment strategy. When you invest in retirement income funds, they allocate your money with diversification of stocks and bonds and are managed by professionals with the ultimate goal of producing monthly income for the investors. The best part about the retirement income funds is that you as the investor control your principal and can tap your money without any penalty. Obviously, the income from your retirement income funds will decline as your withdraw increases.
On October 2015, the Social Security Administration, SSA, released their Social Security withholding rate for 2016. The total Social Security tax limit for 2016 was set to 7.65% for each employee and employer. This Social Security tax rate is broken out into two separate categories. The Old Age, Survivors, and Disability Insurance, also known as OASDI Tax, portion is 6.2% while the Medicare withholding portion or the hospital insurance is 1.45%.
The Maximum Taxable Earning
Our Social Security Withholding rate of 7.65% is on the high end especially the OASDI tax portion. However, the good news is that Social Security Administration did not raise the oasdi tax and med tax rates in 2016 so our total Social Security Withholding rate maintained same as 2015 SSA tax rate.
The maximum Social Security OASDI tax is still set at $118,500 with no limit on the maximum Med tax. This means the maximum Social Security Withholding rate amount remains at $7,347 in 2016.
Useful information in gauging employee’s salary
Do you know what happens if you earn more than the maximum Social Security Withholding rate? In the fall of the year, depending on when you reach the maximum OASDI tax amount, you will notice that your paycheck amount increases without alerting you, most likely about 6.2% higher. If you look and compare carefully between your pay stubs, the increase is due to reaching maximum OASDI tax amount for the year. Psychological, this increase in take home pay check brings much excitement and joy and only those who are fortunate enough to earn more than the maximum OASDI tax amount will experience this feeling of receiving increased paychecks for the remainder of the year.
Here is the trick that you can use to estimate other people’s salary…
You can ask them if they are aware of paycheck increases in November or December by about 6%? If they have no clue then it is safe to assume their salary has not reach the maximum OASDI tax.
We believe the best mutual funds for IRA are the ones that provide safety to your retirement savings. We have worked our entire lives to save for the retirement and cannot afford to take high stake risks after retirement. Many retirement investors look for the safest mutual funds by searching for the best retirement planning tools. By utilizing these retirement planning tools, these people believe they will help them save for retirement and help them to make retirement assets last for lifetime. Therefore, picking the safest mutual funds as part of their retirement investing is one of the optimal retirement strategies and one of the best retirement plans. Experts say one of the safest mutual funds are the retirement income funds.
Retirement income funds are funds that provide a steady stream of income, i.e. 4%, year in and year out. They handle asset allocation and ensures your money doesn’t run out. Retirement income funds come in three main types.
- Target date retirement funds
- Income replacement funds
- Managed payout funds
Major benefit from retirement income funds are the way they are designed to deliver a stable and consistent payout and at the same time keep pace with inflation. These funds are fairly easy to invest and work well for those who want to make investment decisions and actions on their own without involving financial adviser.
Many savvy investors include retirement income funds as they are preparing for retirement and formulating their retirement strategies. As you can imagine, retirement income funds are popular because they help create a simple retirement plan. Many retirees believe they are the best mutual funds for IRA.
However, there are disadvantages of retirement income funds despite being considered as the best mutual funds for IRA. One big negative is that there are no guarantees as they can lose money or cut payouts at any time, reducing the income. This can turn into a major problem for the retirees especially when the living expenses go up, which will drive down your standard of living. As a result, picking the safest mutual funds from your optimal retirement strategies can require more due diligence we might think and should make you think twice before rushing into your retirement investing.
Consider the following retirement income fund called Vanguard Target Retirement Income (VTINX). The fund is a fund of funds, meaning it invests in other mutual funds. It has gained an average 5.4% a year over past 10 years and has a very low expense ratio of 0.16%. This is a stable mutual fund and could be one of the best mutual funds for IRA.
For example, Vanguard’s Target Retirement Income fund’s worst performance was a 16% loss from February 2008 – 2009 when the Standard & Poor’s 500 index lost 43% the same period
Do you worry about your home security? If you are a parent and have a family living in a house, then most likely you are at least thinking of protecting your home and family. What options do you have in home security systems that are affordable and fits in your budget? Most home security system will cost you about $50 per month, that’s $600 a year.
If you can afford to shell out $600 per year for a nice home security system, then you should definitely get one because it will be worth it. I recommend sticking to a well known company instead of small unknown company. The main reason for going with a well known home security company like ADT is the fact that they will be always available, which I think is very important aspect of Home Security. Company like ADT has several redundancy in place in case of disaster recovery. For example, if one of the ADT monitoring location goes down and becomes unavailable, then there is no worry to you as the customer because there is another ADT location that can continue Home Security Monitoring service. Unlike ADT, smaller companies cannot afford to implement similar infrastructure to provide redundancy.
If you cannot afford to spend a lot of money in a home security system, then you will need to do some research in finding a more affordable home security system. One option is the idea of DIY Home Security and look into a wireless home security camera that can connect to online via wifi. I found a real nice camera on amazon called D-Link DCS-932L Day & Night Wi-Fi Camera.
- 16 feet of night vision allows you to see clearly even in complete darkness
- Sound detection and motion sensing technology sends you automatic push alert notifications whenever a loud noise or movement is detected
- View, control and pinch to zoom up to 4x using the free mydlink Lite app available for iOS, Android devices and Windows Phones
You can move it anywhere in your home and you can check in anywhere in the world. If you can buy multiple of these cameras and strategically place them in your home, then it can serve as a DIY home security system that is cost effective. I recommend buying one and try it out before adding more security cameras. You can use the image below and go to amazon.com to place the order.
In the previous post, 5 Common Social Security Mistakes To Avoid – Ignore Spouse, we realized thousands of dollars for our retirement benefit can be lost by not considering spousal benefit. Many Americans continue to fail in this area as we are not maximizing the benefit of Social Security. In this post, a fourth common mistake will be shared, which you can avoid and maximize your Social Security income. You will find out you can actually save retirement money by tapping into your tax deferred retirement accounts (ROTH IRA or 401K) early. Continue reading