One of the best and most successful retirement planning method available to all investors is placing diversified mutual funds that have hefty returns for year-to-date and 3-years and 5-years in traditional Individual Retirement Accounts (IRA) and reinvesting all distribution received from the mutual funds. Being a Financial Planner the author has used this method for over 20 years and can attest to its success. In addition, you, the IRA shareholder, can directly contact the investment company (mutual fund). The benefit is making investments without incurring a broker or dealer fees, there also is no account churning.
There are two kinds of IRA accounts, Traditional IRA and Roth IRA. The traditional IRA portfolio is designed to save for retirement that provides tax advantages. Tax is deferred until reaching the age of 70 1/2. Investment distribution of income and capital gains "reinvested" will not be taxed. However, withdrawal of any distribution prior to the age of 70 1/2 will be taxed.
Mutual funds that have successful long-term returns are excellent investments to build assets in Individual Retirement Accounts. When mutual funds have a 5-year average return of 6%, 7% or better and the stock market goes down, do you really have to worry about the mutual funds performance? A mutual fund is an asset comprised of a pool of money collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, etc. A mutual fund's portfolio is structured and maintained to achieve the investment objective listed in its prospectus. The specific objective, as examples, could be Equity Income, International, Small-Cap, Large-Cap, Health/Bio-Technology, Corporate Debt, High-Yield Munis, etc. Every mutual fund has professional managers controlling, directing, and managing the individual stocks or bonds to buy and sell. There are 4 major factors that investors should always consider when investing in mutual funds.
- Net Asset Value - the current market price of the mutual fund assets per share.
- Performance - comparing the opening share price vs. the closing share price percentage of gain or loss.
- Distribution - income and/or capital gains that mutual fund shareholders receive from the investment.
- Risk - investment losses. The types are below average, average, above-average, or high.
The bottom line for achieving a successful and prosperous retirement program depends on how soon you begin your retirement savings and how committed you are to achieving your retirement goal.