Many people with access to a 401 (k) plan through an employer are fighting for a max. This is because the annual contributions for 401 (k) s are quite high: $ 19,000 for workers under 50, and $ 25,000 for those 50+. But if you are a more deserving person or a more modest way of life, you can save over $ 19,000 or $ 25,000 annual savings. The question is: Where should you put this amount of money after you can no longer enter 401 (k)?
1. One HSA
HSA or Health Savings Account is a hybrid savings and investment account that allows you to set aside funds to be used to cover retirement healthcare costs (and over your work years). The money you contribute goes to a duty-free tax at which time you can invest it and enjoy a tax-free growth. Your withdrawals are then exempt from tax, provided they are used to pay qualified medical expenses.
To qualify for HSA, you must be included in a high-deductible health insurance plan , defined as $ 1
Now, the downside of HSAs is that you are effectively forced to use that money for health care or otherwise pay a 20% penalty for cash withdrawal for non-medical purposes, but after you are 65, you can use HSA for whatever reason, and the worst that will happen is that you will be taxed with withdrawals that are not used for qualified medical expenses. But the chances are that you will need this money for retirement health care, saving surplus money in HSA is an intelligent idea, especially once you get the same tax break for contributions as you would for a traditional 401 (k) .
2. Traditional (No Tax) Brokerage Account
The disadvantage of investing money in a traditional broker is that you will not get tax relief from it and that you will be responsible for taxes on your investment profits year after year. Up? You will be able to use this money for any purpose you want. You can save everything for retirement, or you can spend a great deal of it for your golden years, but also access this money for other needs or desires that appear along the way, such as home improvement, breaks or college training your children. .
Annuity is a contract between you and an insurance company. In return for a lump sum, your annuity publisher agrees to pay you a certain amount of money – either a lump sum in the future or a series of payments over time. Because annuities are complex and sometimes expensive, they are often viewed as an option for the latest resort for pension savings, especially since there are no tax cuts in funding. But if you are looking for another dedicated source of retirement income, and you have already exhausted your 401 (k), the annuity is something worth considering.
If you are lucky enough to be in a position where you have a maximum of 401 (k) and still have the money to save it is worth betting that money to good use. HSAs, traditional brokerage accounts and annuities are all reasonable options for disposing of additional funds for retirement in one way or another.