If you are just getting started in your life, a 401(k) might be a good choice for you. However, if you are already retired and planning to stay retired for years to come, you may want to explore other options.
One of the many advantages of a 401(k) plan benefits you in the form of a tax-deferred growth period. You can build your nest egg and invest in an assortment of investments as long as you choose the type of account that best suits your needs. If you decide to purchase mutual funds, your investment gains will be tax-free and taxed in your hands at your individual marginal tax rate.
If you are retiring with a new home to put in and a family to provide for, then a traditional 401(k) might be the better choice. Typically, a custodian for the account manages the money. In the case of a custodian who does not reside in your immediate area, you can always send a direct deposit check, which is processed by the company. You would have the option of receiving a check directly from the company.
There are benefits to using a custodian over just investing in your own name. The biggest advantage is the ability to keep more of your money. For example, if you invest only 20% of your account in each investment class, you would still be losing money.
If you can afford it, consider investing in stock market safe investments like the S&P 500 Index. The dividend yield may be low but the returns are guaranteed. Also, consider using a custodian that performs a fund screening and you will find a lot of opportunity to make money.
Investing in the stock market has its drawbacks like going bust or bad things happening in the business world. Investing in real estate is another way to have a good return on your account while keeping your interest rate low. When you have a retirement home, the owners will want to sell for several reasons including using the money to pay off their mortgage, paying the taxes on their property and paying off other debts.
Stocks in a retirement home will appreciate in value, while a house will depreciate in value. Both have the potential to increase your account value. In the long run, there is no difference between purchasing real estate and stocks and there is a strong chance to generate a much higher return.
Remember that investing is an investment and you have to be smart about your own investment. If you are retired, it is okay to use a 401(k) but it is best to use one that specializes in mutual funds that will yield you a higher rate of return.