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Basics of Retirement Accounts

Basics of Retirement Accounts

May 25, 2020

This piece is dry, very dry.  But, if you really want to know the basics of retirement accounts it’s well done.  Easy to read with very straight forward and current information.  If you are someone that hasn’t spent time exploring personal retirement plan options, by the time you make it to the bottom of the article, it could seem overwhelming. 

Even if you didn’t read the entire article (or any of it for that matter) there are a few important points I’d like to make.  First and foremost, having a retirement account, or retirement plan through your employer, does not mean you have a “plan for retirement.”  A retirement account or employer sponsored plan should be veiwed as a financial instrument or financial tool.  Having a “plan for retirement” is a strategy or map that coordinates the use of those instruments or tool in an attempt to maximize their effectiveness. 

The type of account you have is only part of the decision making process.  You account or plan selection is what I refer to as “Product Allocation.”  You now have to select the investment(s) that will drive the growth of the account.  This is what is often referred to as “Asset Allocation.”  If you are serious about planning then the type of investment or investment strategy selected should enhance the features or characteristic of the account type selected.   

The ultimate objective of any money put into these types of accounts is to generate income at some future date.  If that’s not the goal then you should probably put the money some place else.  With the recent changes is the rule regarding IRA’s it may be a very good time to revisit what kind of retirement account you own and if it still aligns with your long-term objectives for the money.

All investments and investment strategies contain risk and may lose value.