Inflation is definitely one of the main concerns in retirement of every individual. As prices of everything we use for our daily living increase, the value of our retirement savings from our traditional or self directed 401k plans could just be sufficient or even less when we reach the golden years. Most of the main commodities that seniors need to spend for during retirement years have significantly increased from year 2000 up to present.
Inflation can put your retirement savings at stake, but having self directed 401k plans can help you secure your retirement no matter how much increase the COLA would be in your later years
An example is the price per gallon of gasoline in which a staggering 160% increase from $1.31 more than 10 years ago to $3.41 as of this year. Another example is your healthcare expenses, from year 2000 the monthly premium of Medicare costs $45.50 and now it went higher by $104.90, a rise to almost 131%. Although some companies may offer senior citizen discounts, other important commodities are not covered by it. For self employed people, the cost-of-living adjustment can shudder your personal savings especially of you don’t have a retirement plan you could rely on, in this case, you must be aware how to set up a self directed 401k plan.
Self directed 401k plans provide an individual with higher contribution limits. Maxing out your contribution up to the limit helps you keep up with the inflation, because the higher your savings are the more investment opportunities you could have in your retirement plans and the more investment income your account would earn. Investments can be directed into non-traditional assets including real estate investment that could yield high profits while providing you with stable retirement gains.
Self directed roth 401k account contributions can be made without opening a separate roth account like in an IRA, because a self directed retirement plan like the Solo 401k has a Roth sub account. Making after tax contribution is another way to maximize your retirement savings and discount the effect of inflation as you would be receiving tax-free money in retirement and receive the full gains from your investments.
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