The average American has been swept up by a rising but silent epidemic. It’s not a health epidemic, though it could impact your health in the long term. The epidemic is the lack of financial independence, freedom, and preparedness.
Seventy-eight percent of Americans are stressed about saving for retirement. Considering that the majority of Americans live paycheck to paycheck, this is no surprise. Making matters worse, Americans are saddled with record levels of debt. Debt becomes a problem when it is used to make up for persistent shortfalls in a household budget. Though using a credit card for a one-time emergency won’t upset your life plans, charging hundreds of dollars each month because income falls short will leave you in worse shape down the line.
As a result, Americans have little saved for retirement or their children’s education. Part of the problem stems from the fact that unless you are paid extraordinarily well, saving the amount of money in a retirement account experts project you need is difficult to impossible. Some people think this means they shouldn’t bother saving for retirement, but that’s both dangerous and defeatist.
Rather, investors should think outside the box about retirement savings. There are both conventional and unconventional options for boosting retirement savings. Below, we’ll discuss how to maximize the traditional route while moving part of your assets into some of the new retirement savings options that have recently become available to people of modest means.
Unusual retirement investment vehicles
Unusual investments go far beyond stocks, bonds, and investment funds. Savvy investors are creating wealth with a variety of instruments, including the following:
- Fine Art
- Vintage Cars
- Fine Wine
- Rare currency
- Silent business ownership
- Peer-to-peer lending
Many investors turn a hobby or pet interest into a profitable opportunity. Self-directed IRAs and 401(K)s allow some of these investments within tax-advantaged plans, such as silent business ownership and peer-to-peer lending. The IRS does not allow collectibles or fine wine within a retirement account, but they can make great supplemental investments.
Think real estate
Real estate is a natural long-term investment and inflation hedge. As explained on Good Ideas and Tips, there are a number of strategies you can employ, whether you want to own real estate directly or be more hands-off, including the following:
Real Estate Investment Trusts (REITs)
These are high-dividend stocks. REIT dividends are many times higher than bank interest rates, and you gain from share appreciation. They are also safe relative to other types of stocks.
When adjacent land is developed, raw land can turn valuable.
Invest in a retirement home
Purchasing your downsized retirement home now can save you tens of thousands. You can rent it out in the meantime for additional income or use it as a vacation home. If you buy raw land, you might consider subdividing it. Keep a portion to build your retirement home and sell the rest.
If your company has a match, take it. There is no reason to turn down what is in effect a bonus. It’s best to contribute at least enough to maximize the match. Contributions beyond that should be based on your budget. Just remember, it’s difficult to impossible to make up for the tax bite when you invest post-tax dollars in stocks or bonds outside of these plans.
For people who aren’t eligible for a 401(K), the IRA allows them to enjoy the tax benefits, though annual contributions are capped at $5,500 for people under 55. Unlike the old days, some IRAs offer more options than CDs, mutual funds, and the like.
Self-directed IRAs allow investors to purchase traditional IRA assets and new-age IRA investment options as diverse as gold coins and real estate. As explained by Bankrate, self-directed IRA account holders are able to purchase gold, silver, or platinum coins, as well as gold bullion and silver bars. Those with adequate funds can get into the private mortgage business. A bank does the paperwork, and you loan the money and collect the interest. Though the loan is secured by the property, this option comes with a risk to your principal. Before choosing investments, always clarify the IRS rules.
If you’re self-employed and make enough money to exceed the IRA contribution limits, consider a solo 401(K) instead.
Experts recommend contributing to a Roth if you max out your 401(K) limits and still have more to invest for retirement. Roth contributions are post-tax, but withdrawals from them during retirement are tax-free, which includes all of your gains within the plan.
Investing for retirement takes patience and discipline. It can seem overwhelming until you explore all of the options available. In today’s retirement planning world, there are options to suit everyone.