How Do I Set Up a Retirement Plan for Myself?
Regardless of whether or not you’re already contributing to an employer-sponsored retirement plan like a 401(k) or 403(b), most people have the ability to also open retirement plans on their own. This is a relatively straightforward process that can take as little as 15 minutes to get started. Here are five steps on how you can set up a retirement plan as soon as today.
1) Review Your Retirement Needs
The first and most fundamental step is to consider how this retirement plan will affect your retirement goals overall. For instance,
- Do you not have a workplace retirement plan and will be relying on this one as your primary source of retirement income?
- Do you already have a 401(k) but it does not offer you the investment choices that you would like to have?
- Are you looking to build a more secure retirement by focusing on financial products that may be outside of the broad stock market?
Your answer to these questions will determine which type of retirement plan you should open for yourself.
2) Explore Your Retirement Plan Options
There are several different types of retirement plans that you could open for yourself. One of the most common ones is an IRA (individual retirement account). IRAs are tax-advantaged retirement plans that allow you to save and invest your money so that it can grow into a future nest egg. IRAs can be either traditional meaning you’ll take the tax break now or a Roth-style meaning you’ll take the tax break when you retire.
Keep in mind that there are other types of financial products you could also open as well. For example, permanent life insurance policies are sometimes regarded as the best life insurance to have because it builds cash value in addition to providing a death benefit. Meanwhile, you could also consider funding an annuity that will provide you with consistent monthly benefits once it matures.
3) Partner with a Reputable Financial Service Provider
Once you know which type of retirement plan to open, the next step is to find a good financial service provider. If it’s an IRA he would like to open, you should have plenty of options. Most providers ranging from full-service brokerages to trading apps offer IRAs. However, since this is a plan that you’ll want to have for decades, it’s important to select a partner that a proven track record.
If you’d like to explore options for permanent life insurance policies or annuities, then you can change your focus to insurance companies. Again, consider ones that are well-established and do your diligence by reading online reviews as well as their rating with the Better Business Bureau.
4) Open Your Account
Now that you know which type of retirement plan you’d like to go with and where it’s time to open the account. Most providers will have you fill out an online application and establish a connection to your bank account so that money can be transferred electronically. Depending on their process, this is usually a fairly quick and straightforward task to complete.
5) Contribute to Your Plan Often
After opening your retirement plan, don’t just let it sit idle. Put it to work by making contributions as often as possible. Challenge yourself to reach the IRS maximum every year if possible.
At the same time, be sure to monitor the progress of your retirement plan. Ensure that it’s performing the way you’d expect it to and don’t be afraid to make changes if you feel they are necessary.
The Bottom Line
Setting up a retirement plan like an IRA, cash value life insurance policy, or annuity is relatively straightforward. After deciding which type you’d like to open, find a reputable provider and apply online. Be sure to contribute and monitor your plan often so that you’ll be on track to have a successful retirement.
