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October 31st is not just a day to celebrate Halloween. It’s also National Savings Day! Soon you’ll be going door to door with your little trick-or-treaters, but it’s never too early to start thinking about what it’s like to take your grandchildren trick-or-treating. there is no.
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National Savings Day is the perfect time to think about retirement and plan for the future. Everyone wants to live comfortably in their old age, and they don’t want to burden their children. Proper planning and savings are therefore essential to making your retirement as comfortable and financially independent as possible.
The first step is to ensure you have a nest egg large enough to support your golden years. Here are some places you can safely invest your savings while keeping your long-term retirement plans in mind.
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IRA
An individual retirement account (IRA) is a long-term investment account designed to help individuals maximize their retirement savings or supplement an employer-sponsored 401(k). There are several types of IRAs, but traditional IRAs and Roth IRAs are the most common.
Each type of IRA offers different tax benefits. With a traditional IRA, you can deduct contributions from your income each year, but the earnings on your contributions aren’t taxed until you withdraw them. You must wait until age 59 1/2 to make a penalty-free withdrawal. Both Roth IRA contributions and earnings grow tax-free until withdrawn.
With an IRA, you can put money aside now, let it grow in the stock market, and avoid paying taxes on that money until it’s worth more, much later in life. You can open an IRA at banks, credit unions, and many other financial institutions.
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long-term corporate bonds
Bonds are bonds that are sponsored and guaranteed by the federal government, local governments, or corporations. Unlike stocks, which can rise and fall in value quickly, bonds are bonds that have a regular and predictable rate of return. This makes them not only a great addition to your stock portfolio, but also a powerful vehicle for retirement investing.
When a bond matures, the issuer repays the bond’s value, or principal, to the bondholder. At this point, you not only receive interest payments for the period you hold the bond, you also get your money back. It’s like providing a loan to a financial institution, rather than the other way around.
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Long-term bonds often have maturities of 10 years or more. Because of the increased risk of holding a bond for a long period of time, interest rates are usually higher. Long-term bonds are also more susceptible to interest rate fluctuations.
high yield savings account
Daily savings and checking accounts can still be an important part of your retirement savings.
Consider for a moment the difference in interest payments between a savings account with a 0.5% APY and a high-yield savings account with a 4.5% APY. Most financial institutions now offer at least some type of high-yield savings account.
If you have $40,000 in your account and no additional deposits, you’ll only have $40,200.50 left after one year at 0.5% APY. At 4.5% APY, the total would be $41,799.18. This is almost 8x savings in the same amount of time without risking your money in the stock market.
High-yield savings accounts are a good way to earn short-term gains that can be reinvested in long-term investments like bonds and IRAs, as well as a way to develop better long-term savings habits.
property
Buying real estate is certainly not without risks, but given that home values today are about 50 times what they were in 1950, it’s safe to say that the housing market generally improves over time. Not.
Many Americans choose to sell their home and move into a smaller home after their children leave the nest and retire. Assuming you’ve owned your home for a while, it’s very likely worth much more now than it was when you bought it. So selling your family home or investment property when you no longer need it can provide a significant retirement benefit.
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This article originally appeared on GOBankingRates.com: 5 safe ways to invest your savings with an eye on retirement
