By Matt Andersen, CPA, Founder of MD Andersen, CPA PA
Saving for retirement is a critical financial decision that secures your lifestyle, especially in your later years. 401 (k) and Roth accounts are popular retirement savings accounts with tax advantages. However, if you need to supplement your savings, you will need to look beyond traditional options. Here are three alternative accounts you can use to save for retirement.
A brokerage account is a type of taxable account that you open with an investment firm. The money you deposit in the account is used to purchase different investment securities. You can buy different types of stocks including common stock, bonds, REITs, and mutual funds.
Typically, brokers charge fees depending on the level of services provided. Full-service brokers trade on your behalf and are available on call for consultations. For full guidance on stock trading, a full-service stockbroker is best. However, if you prefer to conduct your trades, especially online, a discount broker would be ideal.
Money Market Accounts
Usually, money markets have better pay-outs than regular bank savings accounts. There are several accounts in the market with Annual Percentage Yields (APYs) higher than 1.50%. Why does this matter? If you were to save $10,000 in a bank account with a 0.10% APY, you would only make $10, while a money market account could earn you $150 on the same amount. Though most accounts have a higher minimum balance, they earn high interest on your savings. You can also rest easy since the accounts are federally insured.
Certificates of Deposit
Most banks and credit unions offer Certificates of Deposit (CDs). These investments are FDIC-insured, just like typical bank accounts, but provide high-interest rates, especially for large deposits. Usually, CDs have fixed maturity periods of six months, one year, or five years. You have to keep your money in the account for the agreed period as early withdrawals will attract penalties.
Find Alternative Retirement Savings Accounts
At MD Andersen, CPA, PA, you can learn how to maximize your savings for better retirement funds. Contact us today and find out which option is best for you!
Matt Andersen, CPA loves analyzing data, people, and businesses. He is passionate about helping entrepreneurial-minded clients achieve their goals, keep more money in their pockets, and live a higher quality of life. In addition to tax and accounting services, Matt provides one-on-one coaching for various topics including lifestyle entrepreneurship, advanced tax planning, and new business creation.