by Chris Devers
Warning: You Should Read This Before Thinking about Your Retirement Plans and Options
Does your company only offer you retirement plans like the 401(k)? Well, this means that you are rather limited when it come to having different investment options. You should not worry. There are many different employer retirement plan options to explore. Let’s start off with the one with least risk.
Money market funds This is also known as savings account. Every month, you should be depositing some amount into your savings. This is the good habit preached by everyone everywhere. True, this is the least risky option but also with the lowest payout. The only danger of staying within a savings account is that inflation will catch up on your rate of return.
Bond mutual funds This type of mutual fund invest in multiple and unique high-quality bonds. This is because bonds will generally pay higher rates of interest. This is also known as dividends. Selecting a bond fund is always better than a money market fund (or savings account).
But with greater earning percentage, comes greater risk. However, if you compare with stocks, bonds are still better if you consider the short term yield.
Who should invest in bond funds? It is suitable for people who are interested in keeping their money safe but want higher returns. These generally include older and senior citizens. Bond funds would not attract young and hot-blooded adults.
Guaranteed-investment contracts These are also known as the ‘GICs’. They are provided by insurance companies. Unlike bonds or stocks, ‘GICs’ will always guarantee a positive return.
One good thing with the ‘GICs’ is that your account value does not fluctuate as much at all. In terms of profits, ‘GICs’ have the same amount of return rates with bond funds.
Of course, they are still better than savings accounts. The only risk you face is that the insurance company might go bankrupt. In this case, you will lose all of your money.
Balanced mutual funds They invest in both stocks and bonds, hence the name. If you invest individually into bonds of stocks, it is more risky than investing in a balanced mutual fund.
Stock mutual funds Like its name suggests, it only invests in stocks alone. As we all know, stocks provide great benefits for the long term. But be prepared to face lots of fluctuations as the years go by.
Investing into your own company This would be considered as buying your company’s own stocks. But the problem is that if you do invest in it, you are said to be putting all of your eggs into one basket. That is because you are already depending on the same company for monthly income. Have you ever given a thought about retrenchments? This is by far the most risky retirement account investment option.