A Guide to the Stages of Retirement Planning

When most of us think about planning for retirement, we’re focused on just enjoying our golden years. However, there are actually several phases that go into successful retirement planning.  

This guide takes a look at each of the different phases of retirement planning. Plus, we’ll break down what steps to take at each phase of retirement.  

Stage 1: Pre-Retirement 

Pre-retirement usually starts somewhere between the ages of 50 and 62, and refers to the decade before you actually retire. During the pre-retirement phase, you’ll be honing in on how much income you’ll actually need to have during retirement.  For the smaller group of forward thinking people in their 30s and 40s who are actively saving and thinking about retirement, that extra effort and time (in terms of all those additional years of tax deferred or tax free compounding) will really come home to them by the time most other people are just starting to get serious ( early 60s).  

This phase is particularly important because most people don’t start to think about retirement planning until it’s too late. During the pre-retirement phase, however, you have an opportunity to look at your finances and really get a feel for what your golden years will look like.  

This is also the time to check what balances you have in your retirement plans, such as a Roth IRA or a 401(k). You’ll also want to check out any other investments that you currently have to see how they’re performing and what types of ROI they’re offering.  

Additionally, you’ll want to use this time to get a feel for the lifetime retirement benefits offered by your local, state, and federal governments. Remember, 62 is the earliest that most people are able to start withdrawing Social Security benefits. Or, you could choose to increase your retirement savings by waiting to withdraw on your Social Security payments.  Each year from age 62 to age 70 that you wait to start your Social Security benefits, they grow by 8%. Since we cannot earn a guaranteed 8% anywhere else at this time, this makes a strong case for people to consider delaying their Social Security benefits for at least a few years from age 62. 

Lastly, during your pre-retirement phase, you’ll need to create a budget and a savings plan to help ensure you can live comfortably during retirement. Try to pay off any debt you have in order to free up even more income during your golden years. Additionally, you need to factor in some assumptions about how much higher the cost of living will be upon your retirement (“inflation”).  

Stage 2: Early Retirement 

After the pre-retirement phase is the early retirement phase. Most people enter this phase when they’re between the ages of 62 and 70. This phase is sometimes called the honeymoon phase, and it refers to the first couple of years you’ll enjoy as a retiree.  

During the early retirement phase, you’ll be adjusting to your new lifestyle. As a result, it’s not uncommon for retirees to overspend during these first few years as they get used to their new spending habits and extra free time.  

The early retirement stage is also when many people are eligible to receive full Social Security benefits, as well as some possible state benefits. Additionally, some people choose to get a part-time or full-time job to help support their lifestyle or to stay occupied. 

Some individuals may also need to adjust their healthcare plans during this phase of retirement. In most cases, this will mean a transition to Medicare and a Medicare Supplemental policy from the prior coverage. Making sure to check what your coverage terms are and how they work will help to ensure you don’t have any breaks in your healthcare coverage.  This is also the latest you should be addressing and planning for potential long term care, or chronic illness costs that can enter the picture toward the end of your life. 

Stage 3: Mid-Retirement 

Mid-retirement usually takes place between the ages of 70 and 80. During this phase of retirement, most people are starting to settle into their new lifestyle. Additionally, many retirees spend less money during this phase due to being more settled, downsizing, potentially traveling less, or no longer supporting dependents.  

At the same time, this is when budgeting for inflation is critical. Many retirees forget to budget for inflation, and as costs go up one year to the next, they find that they can’t keep up. Proper budgeting and income planning from a professional can help you avoid this scenario and truly relax during your mid-retirement years.  

During the mid-retirement phase, it’s also time to check out your legacy plan and your estate planning documents. You may want to assign a close friend or family member a durable financial and health care power of attorney in the event that you’re not able to execute your wishes in your final days. Undertaking these types of decisions will help to make your retirement easier, and give you peace of mind.  

Stage 4: Late Retirement 

Stage four is the late retirement phase, and is the last part of your years as a retiree. During this time, many individuals need to plan for long-term health care support, such as moving into an assisted living home or hiring someone to help you in the house.  

This is also the time to look into what death benefits your family will need and what steps need to be taken on your end to ensure payouts, and an efficient transfer of both wealth and important values.  

Finally, many retirees experience increased costs during the final phase of retirement. This is largely because of increased expenditures due to healthcare costs. Ensuring that you have a cushion for these types of expenses during the last stage of retirement is key. If prior planning had not been done on this front, there is a very real chance that a healthy spouse could accidently be impoverished, or loved ones accidently disinherited. Additionally, if there is a prolonged physical or cognitive condition, you could run out of money altogether. 

Final Thoughts 

The stages of retirement aren’t a hard-and-fast rule for how to plan for retirement. However, they can certainly make it easier for you to settle into your golden years without any unexpected expenses.  

Try organizing your retirement years around these phases of retirement planning in order to be fully prepared for your golden years. And remember—the sooner you start planning, the easier it will be for you to settle down and enjoy your retirement.

How to Use Crypto Investments to Save for Retirement

Many people know that investing in cryptocurrency can be a way to build wealth and start increasing their potential future income. However, not as many people think about the benefits of investing in cryptocurrency in order to save for retirement.  

This guide goes over different ways that individuals can invest in cryptocurrencies in order to save for retirement. It also discusses the benefits of doing so and why it can be a great way to bolster your retirement savings.  

How Building Retirement Portfolios With Crypto Works 

If you want to get started building a retirement account using crypto investments and digital assets, the first step is to find an IRA custodian who will allow you to purchase these investments.  Please note that these custodians that allow the purchase and sale of cryptos will usually charge some annual fees that a custodian who only holds stocks bonds and mutual funds will not. 

IRAs That Allow Crypto Purchases 

Although it sounds easy enough to add crypto to your retirement portfolio, not all IRAs actually allow you to do so. As a result, you’ll need to make sure that you find one that does if you plan to use crypto investing as part of your retirement strategy.  

These types of IRAs are actually just self-directed IRAs, which means that you are in charge of what enters and exits your account. A couple of the more popular crypto IRAs out there include:  

  • Bitcoin IRA 
  • CoinIRA 
  • BitIRA 

Remember, when choosing a cryptocurrency IRA you need to make sure to check reviews and research sites like Trustpilot. With the rising popularity of crypto purchases, a number of scammers have begun setting up fraudulent self-directed IRAs, which can leave retirees penniless.  

Doing your due diligence can help you to avoid these types of scams and select an IRA that can offer a potentially strong return on your investment.  

Purchasing Cryptocurrency for Your IRA 

Once you’ve selected which IRA you’ll use to make crypto investments, it’s time to actually add those investments into your account.  

The easiest way to do so is to use , checks, direct deposits, or transfers from another IRA to invest in your account. Remember, there are annual limits which, for 2023, is $6,500 ($7,500 if you’re over 50). 

Additionally, if you have a plan through an employer, you may be able to do an “in service distribution” and roll out some funds to an IRA, and can then start adding crypto , which lets you enjoy a tax-deferred status on any funds currently in your account. Or, you can simply move all of your funds into an IRA that allows crypto purchases, if you leave the job and are eligible to rollover the funds in the company plan.  

Once you’ve moved your cash into a crypto-compatible IRA account, you can start using the funds within your retirement account to trade for cryptocurrencies. Just remember that you’ll still have to pay fees for transactions as well as for your IRA, which can quickly add up.  

Benefits of Purchasing Cryptocurrency for Retirement 

There are a couple of potential benefits of purchasing crypto for retirement. For one thing, cryptocurrency has the ability to rise dramatically in the coming years. Bitcoin, Litecoin, Ethereum and others have seen enormous success over the past several years, despite the more recent weakness seen in the past 12-15 months or so.  

While cryptocurrencies must still be considered speculative, or “aggressive growth” holdings for most people, these types of investments can offer high returns that could help bolster your future retirement income.   

Also, cryptocurrency purchased and held in IRAs can provide the typical tax benefits that IRAs offer with more traditional investments. Some retirees may be able to lower their tax liability by avoiding capital gains taxes on these types of investments for many many years.  

Despite the benefits of purchasing crypto for your retirement account, you should be aware of the risks.  

A few of the most common risks include:  

  • Insurance: The FDIC does not insure cryptocurrency in the event that something goes awry. 
  • Market: The crypto market is highly volatile and experiences regular fluctuations that can lead to great financial losses. 
  • Fraud: There may be a fraudulent crypto exchange, so retirees need to be cautious when looking for crypto IRAs.  

Final Thoughts 

Cryptocurrency is one of many investments that individuals can use in order to save for retirement. At this stage, it should only be a small percentage of anyone’s retirement portfolios, due to its risk levels, but of course along with those higher risk levels comes the opportunity for abnormally large gains. Just remember that purchasing cryptocurrency through a retirement plan must be done under specific conditions and is only allowed with specific types of retirement accounts.  

Additionally, it’s important to weigh the tax benefits and potential returns against risks of fraud and fluctuating market conditions. That way, you can determine whether this is a smart investment choice that makes sense for you.  

A Guide to New Cryptocurrencies in 2023 

Once a radical idea, the thought of investing in cryptocurrency has taken off in recent years. In fact, research suggests that around 21% of American adults have invested in or purchased cryptocurrency at some point.  

Although Bitcoin is by far the most well-known and popular cryptocurrency, there are actually a number of different digital coins on the market. A few other big names include Ethereum and Litecoin.  

With that said, new cryptocurrencies are emerging on the market all the time, and in 2023, there are already some new cryptocurrencies that investors should be aware of. Here are a few of the newest cryptocurrencies and what to know about them.  

FightOut ($FGHT) 

FightOut is a cryptocurrency that’s designed to get people moving and help support fitness and exercise. This cryptocurrency is closely tied to a fitness application and teams up with gyms using special sensors.  

The idea is that users who invest in the cryptocurrency receive additional rewards from working out. For instance, investors who use the app can receive something called REPS, which they can exchange for items such as workout gear and supplements.  

Early investors can get good discounts on these coins, as well, by making investments before the coin potentially takes off.  

Meta Masters Guild (MEMAG) 

Meta Masters Guild, called MEMAG for short, is thought to be one of the hottest cryptocurrencies hitting the market in 2023. To put it simply, this cryptocurrency works on a play-to-earn community where individuals play certain games and are rewarded with MEMAG coins.  

MEMAG has a number of games on the platform, all of which are available on both Android and iOS smartphone devices, making it easy for investors to earn money on the go. Alternatively, investors are able to stake their investments in order to receive passive income, rather than having to actively participate in any games.  

Finally, one key feature of this cryptocurrency is that the gaming guild platform allows indie designers to create their own games to add to the space. The idea is that this will create a supply of games that doesn’t diminish quickly, enabling more individuals invest in the coin.  

C+ Charge (CHCG) 

CHCG is a cryptocurrency that’s designed for individuals who drive electric vehicles, often called EVs for short.  

This project’s main goal is to help encourage individuals to reduce their carbon impact by switching from gasoline-powered vehicles to more environmentally friendly electric vehicles. CHCG will help encourage this by using blockchain technology to distribute carbon credits to EV drivers.  

As part of this initiative, C+Charge will create several charging stations for EVs. Then, when an EV owner uses the C+Charge app to charge their electric vehicle at one of the crypto’s partner stations, they’ll be rewarded in tokens which can lead to carbon credits.  

Metropoly (METRO) 

Another cryptocurrency that is launching in 2023 and which is likely to be very popular is Metropoly. METRO, as this coin is called, is a cryptocurrency which allows individuals to invest in investment properties without having to go through banks or be subject to hidden fees.  

Additionally, METRO allows investors to make purchases of income-generating properties without any geographical limits. The idea with these tokens is that investors are able to make smaller-scale investments into these types of properties without having to commit large chunks of capital. For example, investors are able to invest as little as $100 into METRO. 

The blockchain used for this particular cryptocurrency is Ethereum, and there is currently a beta marketplace that has already launched for the coin. The developers launched the marketplace ahead of releasing the actual tokens themselves to help kickstart the cryptocurrency’s success.  

Dash 2 Trade (D2T) 

Dash 2 Trade, more commonly referred to as D2T, is a new cryptocurrency that’s been launched to help improve the trading network. It’s had a hugely successful pre-sale of more than $15 million.  

This platform has a series of signals that alerts users when they should buy, sell, or maintain their current assets. The idea is to help crypto investors avoid scams and become more efficient at trading. D2T also plans to track popular social media channels, such as Twitter and Reddit, to help make predictions more accurate for users.  

The platform also plans to have a strategy building API that enables users to create strategies and come up with potential trading plans to help maximize their earnings.  

D2T is set to have three tiers to it—free, starter, and premium. The features will increase with the amount paid for access to the platform.  

The Bottom Line 

There are some exciting new cryptocurrencies launching in 2023, with benefits ranging from new ways to invest in real estate to carbon credits for EV drivers.  

As the political, economic, and environmental landscape shifts, so too do the types of cryptocurrencies launched. Each new cryptocurrency has different advantages in today’s landscape and could make for some interesting investments.  

Consider investing in one of these new cryptocurrencies this year, and see where 2023 and beyond takes your investments.  

How Do I Invest in Digital Assets? The Difference between Cryptocurrency and NFTs  

NFTs and Cryptocurrencies are two popular investment categories that have been in the news increasingly in recent years. In many cases, you’ll hear these terms used interchangeably. However, they are two unique types of investments. Both asset classes have their own particularities and characteristics that are suitable for different investment goals.  

This guide breaks down a few of the key differences between cryptocurrency and NFTs. It also goes in-depth as to what each one is, so that you can decide which is the right investment choice for you. 

What Is an NFT? 

NFT stands for Non-Fungible Token. These are digital tokens that cannot be divided, copied, or substituted. NFTs are unique identifiers, which means that they mark a single item that cannot be replicated or used interchangeably with another. To give you an example, an NFT would be like an original Van Gogh painting. You can’t copy, divide, or substitute a Van Gogh painting because it doesn’t have the same value as the painting made by Van Gogh himself.  

NFT technology creates a digital trail and verifies transactions such as purchases and sales. It also contains certain information about the current owner of the NFT, such as the date of the most recent transaction and the NFT’s current location. NFTs are commonly used in blockchain technology. NFTs can be used to ensure that the product you are purchasing is authentic. Since the blockchain can permanently store information about the product, checking for authenticity will soon be a requirement on countless physical products too. NFTs can also be used to store information about the manufacturing process, ensuring that everything is up to code and ensuring fair trade. 

NFT applications don’t stop at consumer products either. There have already been numerous companies successfully using NFTs for industrial design prototyping purposes. 

One problem in the world right now is fake food products like supplements and certain medicines.  NFTs can help solve this by tracking and tracing food products through their entire journey – from manufacturing to shipment. 

In many cases, NFTs are used with cryptocurrencies, such as bitcoin, to show ownership and make transactions transparent. 

What Is a Cryptocurrency? 

Cryptocurrencies are thought of as digital or alternative currencies, but they are actually digital assets that utilize distributed ledger technology, a.k.a. blockchain, to make digital transactions secure. They use cryptographic means to maintain the security of transactions and oversee the creation of new units of currency. Currently, there are several different cryptocurrencies available on the market:  







Of course, you can exchange your crypto for cash and vice versa, using them to make purchases online. However, they change their value frequently, which can make these transactions complex. Like NFTs, there is no need for an intermediary bank account. 

What’s the Difference? 

Now that you know what NFTs and cryptocurrencies are, let’s go over a few of the key differences between them. Here’s a quick breakdown of some of the major differences between these digital assets.  

Cryptocurrencies Are Fungible 

As mentioned above, each NFT is valued independently, so it is not possible to exchange one for another. This is because each asset has a unique identification code and metadata that accompanies and distinguishes it. Cryptocurrencies, on the other hand, are traded and exchanged at the request of individuals in a manner similar to fiat currency. As a result, cryptocurrencies are fungible and NFTs aren’t. 

Cryptocurrencies Are Divisible 

Another key difference between cryptocurrencies and NFTs is that NFTs are not divisible. In other words, it’s impossible to divide an NFT into smaller parts or values. That’s because they’re considered a complete asset or token.  On the other hand, cryptocurrencies can be divided. Just as a dollar can be divided into cents, cryptocurrencies can be divided as well.  

To make the comparison even simpler, think of an NFT like a Picasso painting. If you split it in half, it wouldn’t be worth anything. On the other hand, cryptocurrency is more like $100. You could exchange that for two $50 bills or put $50 in each of two accounts. 

NFT’s Have Inherent Value 

Like works of art in museums, NFTs can be worth millions because of their inherent artistic value, history, cultural importance, or the creator’s fame. These are items that might be worth nothing now, but which could be worth very substantial sums in the future.  

It’s even expected that in the future, NFTs will be used in the global market as a replacement for identity documents, property titles, etc.. In the gaming world, they have the potential to improve marketing sources, monetary incentives, and rights management through tokens. On the other hand, cryptocurrency follows a much more linear valuation system. A crypto’s value goes up or down much as money’s does, as opposed to how a fine work of art would.  

Final Thoughts 

Although they’re sometimes confused with one another, NFTs and cryptocurrencies are not the same. Both can be valuable investments. Once you have learned to differentiate between them, you’ll find it easier to manage, invest, sell, and buy them in ways that meet your goals. Both cryptos and NFTs offer investors potentially explosive upside potential, but also carry higher than normal volatility.  They generally should only be considered for a small part of your aggressive growth or speculative portfolio. 

7 Tips That May Help to Increase Your Retirement Savings

Many retirees, unfortunately, are ill-prepared to actually retire. In fact, about 37% of retirees in 2022 said that they didn’t have enough money to enjoy their golden years.

There are several reasons why this might happen, which include not starting to save early enough or not putting away enough cash each year. Regardless of the reasons why this happens, it doesn’t have to be the case for retirees.

This guide covers several ways to save for retirement and avoid becoming part of that 37%. Here’s what to know about saving for retirement and putting aside enough cash to be able to truly enjoy your hard-earned golden years.

  1. Take Advantage of Employer Match Plans

Many employer retirement plans offer matching contributions. What it means is that for every dollar you save in your plan, your employer partially or fully matches your contribution.

Although most of these matching plans are capped at a certain amount, the caps are often quite high. A typical employer match amount is 3% of an employee’s salary, but is often as high as 6%, which can work out to thousands per year in “free money”.

Unfortunately, many employees don’t take full advantage of these plans. Instead, they add a small amount to their retirement savings, not thinking about how much additional income they could earn by meeting their employer’s match savings.

Rather than just adding to your 401(k) here and there, identify the maximum that your employer will match when you contribute to your retirement account. Then, aim to meet that amount so that you can get the maximum “free money” savings throughout the year.

  1. Make Use of Catch-Up Consultations

One of the reasons why it’s important to start saving early if you can is that yearly contributions to IRAs and 401(k) plans are limited. The good news? As of the calendar year that you reach age 50, you’re eligible to go beyond the normal limits with catch-up contributions to IRAs and 401(k)s. So if over the years you haven’t been able to save as much as you would’ve liked, catch-up contributions can help boost your retirement savings.

  1. Automate Your Savings Plans

Thanks to modern technology, many banks and financial institutions have APIs set up that allow you to automatically set up payments to your retirement fund. The benefit here is that you can set the automation to pull money from your bank on a certain day of the month.

The benefit of this is that you don’t accidentally miss a payment to your retirement plan. Additionally, by setting up automatic payments, you know that a certain amount of money is going out of your account each month. This can make it easier to budget around your retirement savings.

  1. Delay Social Security Savings

Another tactic for putting more money aside for retirement is to delay your Social Security benefits. Although this might sound counterproductive, the way this works is as follows.

Starting at age 62, you can receive reduced Social Security benefits. However, each year you wait to take your benefits, up until age 70, you earn what are called “delayed retirement credits” of 8% per year. These can obviously increase your Social Security benefit significantly. The result is that once you’re ready to begin your retirement payments, you’ll have more funds at your disposal every month.

  1. Take Advantage of Double Contributions

Another big way you can save for retirement is by contributing more than once to your retirement plan. Although many people aren’t aware of this, some teachers, public sector workers, healthcare employees, and employees at nonprofits are able to add double the amount of cash to their retirement plans.

Of course, not everyone is eligible for these savings. However, for those who are eligible, this can actually allow them to contribute much more to their retirement accounts, all of which can add up to big savings in their golden years.

One thing to note about this benefit is that it’s only applicable to specific 457(b) and 403(b) savings plans. If you think you might be eligible, it pays to check the IRS website, and with your HR person to be sure.

  1. Apply for Uncle Sam’s Retirement Savings Credit

Lower-income earners can also take advantage of savings credits to help them save for retirement. For instance, Uncle Sam’s Retirement Savings Credit offers a tax credit of up to 50% of your retirement plan contribution.

There are income limits for this credit, depending on whether you’re single or married. However, even just that extra boost can make a big difference when it comes to your retirement savings.

  1. Consider Where You’ll Retire

Many individuals don’t realize that the location they choose to retire in can have big implications for their nest egg. A few states actually have no state income taxes, meaning that you won’t have to pay those taxes on your income during retirement.

A few of these states include:




New Hampshire

South Dakota





In addition, most states don’t tax Social Security income. As a result, you won’t have to worry about paying additional taxes on this type of income once you retire.

Final Thoughts

Saving for retirement can be daunting. However, with the right plan in place, you can start building a nest egg that will offer enough cash for you to comfortably enjoy your golden years.

Small steps like taking advantage of savings credits or meeting your company’s match amount can lead to big earnings later down the line. Consider implementing these 10 tips, and enjoy larger income streams during retirement.

6 of the Most Important Things to Know about Retirement Preparation 

Thinking about retirement can be daunting. There’s a lot to consider, and many times, people don’t start planning until the last minute. To make planning for retirement a more streamlined process, there are a few guidelines you can follow. This guide explores some of the most commonly given retirement planning advice. 

Rule #1: Begin Putting Money Aside ASAP 

One of the first recommendations of retirement planning is to start saving early. The earlier you start saving, the sooner you’ll have enough of a fund built up to retire comfortably. Although saving for retirement can be started at any age, your early 20s is often a good time to get going. The power of compounded growth over time ( especially decades) should not be underestimated. If you can direct the bulk of your early years retirement savings to a tax deferred or tax free account such as an IRA or 401k, the compounding effect is even more powerful, as there is no interruptions for taxes due for all those many years. That way, by the time you reach your golden years, you’ll have a nice nest egg built up. If you have already advanced in your career, the only time better than your 20s is today. 

Rule #2: Save As Much As Possible 

Another retirement precept is to save somewhere between 10 and 15 percent of your current income each year for retirement. This is a great starting amount to help you start putting away cash for later in life. However, this amount may need to be adjusted depending on your circumstances. If you’re unable to contribute 15 percent but your company offers a match up to 3 percent, can you contribute up to the match? 

On the other hand, if your retirement years are fast approaching, you may want to put aside more than this. In that situation, you could increase your savings to as much as 20 to 25 percent, even if this means some negative adjustments in your current spending habits. 

Rule #3: Have a Liquid Emergency Fund  

Having an emergency fund is a key aspect of any financial plan. During your retirement, this becomes even more important to help pay for medical bills or other unforeseen emergencies that may arise. In general, retirees should try to have about 6 months’ worth of income in a separate, accessible savings account for emergencies. This money can then be used without dipping into retirement funds in the event an expense requiring cash rears its head. 

Rule #4: Determine a Withdrawal Rate That Feels Safe for You 

One of the most common retirement recommendations that experts make is the 4 percent rule for retirement planning. This strategy assumes retirees withdraw no more than 4 percent of their retirement savings each year. Each year, retirees will need to adjust their withdrawals for inflation.  

To put this into context, let’s go over an example. Let’s say that you save up $1 million for retirement. Using the 4 percent rule, you would withdraw $40,000 from that accumulated base in your first year of retirement. The next year, if the inflation was 0 percent, you would withdraw another $40,000. The following year, if inflation goes up 1 percent, you withdraw $40,400. Then, each year after that you would continue to adjust your income based on the inflation rates.  

Despite this rule working much of the time, there are a few caveats. For one thing, this rule is based on a 30-year timeframe. Eventually, you do start to draw down balance, and if you end up living for more than 30 years, then you may not have enough cash when you need it. Additionally, this retirement rule doesn’t account for taxes or other fees. If you are using your tax deferred retirement account balance to cover these fees and taxes, then you will likely deplete your funds sooner.  

Rule #5: Pick Low-Cost Funds 

Another retirement guide is to choose investments that have low carrying costs. Doing so means that you can maximize your investments without having to spend too much. Investing in target date funds is a practical option for many people since the expense ratio is significantly lower than other types of investments. 

You’ll also want to remember that some investments incur additional expenses. For instance, it’s important to consider the expenses that mutual funds and exchange-traded funds (ETFs) charge, as well as the commissions that are paid for selling or buying. You can also look for investments that don’t charge commissions. If your time frame is long enough ( i.e. more than 10 years) you can consider just buying and holding some core investments instead of  changing them frequently. 

Rule #6: Consider How Much Income You Will Need in Retirement 

One of the most common retirement rules is the 80 percent rule. Basically, this rule implies that you’ll need about 80 percent of your pre-retirement income during your golden years. Why wouldn’t you need 100 percent of your pre-retirement income? It’s generally assumed that people will not incur the same expenses as when they worked. 

However, this rule has generated controversy. That’s because new research has shown that retirees may actually spend the same amount that they did pre-retirement. Some reports even state that spending increases, since many individuals begin to enjoy new leisure activities with their increased free time. Still, as retirees get used to their retirement and settle into patterns, they may start to develop habits that can keep them in check. The key is to identify your goals in retirement and determine how much income you will need to meet those goals and lifestyle choices. 


The sooner you start planning your retirement, the better. You’ll be able to start relaxing and enjoying the finer things in life. Just remember these rules. Doing so will set you up for success and leave you with the tools you need to have healthy, successful, and financially rewarding golden years. 

10 Holiday Gifts You Can Pay for in Cryptocurrency 

Now that the holiday season is just around the corner, most people have holiday shopping on their minds. While you can certainly purchase Christmas gifts with fiat, more and more platforms are starting to accept crypto payments. Despite the tumult and negative press toward cryptos resulting from the huge FTX scandal ( which was related to a false exchange, and had nothing to do with Bitcoin, or Litecoin, etc.), they are here to stay, and will gain more acceptance in the future, along with NFTs, simply due to their use of blockchain technology, which is a superior, and safer way to conduct business transactions.  

Whether you’re looking for presents for someone young or old, there are plenty of platforms out there that you can buy with your crypto cash. Here are 10 ideas to get you started.  

1. Action Figures 

For loved ones who love toys like action figures, check out Tenacious Toys. In addition to action figures, Tenacious Toys also has a variety of apparel and arts and crafts.  

The brand is crypto-friendly because it actually encourages you to pay with crypto. It normally gives a 25% discount for customers using Bitcoin as their payment method, meaning you can save some money on holiday purchases.   

2. Jewelry 

Overstock is an online retailer that sells men’s and women’s fashion, including jewelry and accessories. Most retailers on the platform accept varying forms of cryptocurrency, although Bitcoin is the most popular.  

One of Overstock’s major jewelry brands, Reed’s Jewelers, also accepts cryptocurrency payments in their physical store. So, if you prefer to shop in-store, that’s an option, too. 

Besides Overstock, you can also check out shops like Moyo Gems. Moyo Gems is one of the first retailers to offer blockchain-certified precious stones, where you can find all the information on Everledger.  

Everledger is also a supply chain running on blockchain. This way, tracking the jewelry’s manufacturer, stones used, and other information you must know about the jewelry is easier.  

3. Video Games 

Several PlayStation game retailers accept crypto as payment for console games like PS5 or PS4. More people prefer using crypto to buy games because of the similarities in the gaming and crypto industries.  

Over the years, gaming and crypto grew close because more consumers prefer digital money’s online format. Additionally, PlayStation Network allows users to pay for add-ons, games, and network subscriptions using crypto.  

4. Artwork 

Today, more people are starting to appreciate precious art pieces as decor. That can make artwork a great gift for family members this holiday season.  

Over the years, art and cryptocurrency have developed long-lasting relationships, especially because crypto helps artists prove their legitimacy and protect their artwork.  

Artwork registered on the blockchain can help you become more confident that they are legitimate and authentic. Plus, you can also purchase these masterpieces using your crypto, such as Bitcoin.  

5. Airfare or Vacation Packages 

Cryptocurrencies are often used to purchase big-ticket items, making airfare and vacation reservations a great way to spend this kind of cash.   

Some of the online booking sites which accept Bitcoin as the payment method include: 

  • AirBaltic – the first airline to accept Bitcoin as payment for the flights 
  • Expedia – currently accepts Bitcoin as payment for booking hotels 
  • Virgin Galactic – the first commercial spaceline which accepts Bitcoin as payment 

6. Gift Certificates 

It can be tricky to buy a gift for someone picky. One of the best ways to still make them feel special is by giving them a gift certificate. 

Many digital gift card platforms now accept crypto money as a payment method. For instance, the Gyft app allows you to purchase gift cards using Bitcoin as payment.  

Some of the famous retailers from Gyft include Sephora, Target, Nordstrom, and Starbucks. Gyft is a trusted app because it won’t charge anything extra while maintaining secure transactions. So, there are no added costs to purchasing with Bitcoin on the platform. 

7. Clothing 

Clothing brands are starting to accept crypto as a payment method, as well. This is largely because the fashion industry has developed a trusted relationship with the crypto industry, thanks to blockchain technology.  

Blockchain technology has allowed fans of luxury and designer clothing to verify whether an item is legitimate. This reduces the chances of getting involved in fraud and scams when purchasing expensive designer wear.  

Branded fashion items are normally sold in online stores like Crypto Emporium, which is where you can pick up clothing gifts for loved ones. 

8. Electronics 

If you think your loved one deserves a new phone or any gadget, Newegg accepts crypto, particularly Bitcoin, as payment. As a bonus, Newegg does not require you to convert your crypto to fiat cash by using a third-party service.  

All you have to do is use the “pay with Bitcoin” button on Newegg’s website. Alternatively, you could use Newegg’s QR code system to make a purchase on your phone. Either way, it’s easy to use your saved-up bitcoin to buy gadgets for friends and family.  

Newegg also sells mining starter kits for cryptocurrency. That way, you can also put your crypto towards helping someone else start mining their own. 

Alternatively, another online platform offering electronics for purchase via crypto is BitDazzle. This site offers special discounts when paying with Bitcoin. Referring the brand to another friend can also earn you a $25 BTC reward.  

9. Luxury Items 

In May of 2022,  Italian luxury brand Gucci announced that they will start accepting payments in cryptocurrencies in some of its stores in America. 

Customers will be able to pay using a number of cryptocurrencies, including Bitcoin, Ethereum and Litecoin. 

Gucci is the latest big name to announce that it will take cryptocurrency as payment. 

Some of the world’s biggest brands now accept digital currencies, including technology giant Microsoft, US telecoms firm AT&T and coffee chain Starbucks. 

In the last year Bitcoin has also become legal tender in two countries - El Salvador and the Central African Republic

Final Words  

Using crypto as payment has never been this convenient. Now that more shops accept this, you have more options to choose from when shopping during the holidays.  

Check out some of these crypto gift ideas, or explore others on your own. You never know what you may find. 

An Easy Guide to Cryptocurrency ATMs – How Do They Work?

Newcomers to cryptocurrency might think buying cryptocurrency can be a hassle. Plus, most people don’t love the idea of linking their bank accounts to an online platform.  

This is where cryptocurrency ATMs come in handy. They’re not exactly like ATMs you use to withdraw and deposit your money, but their user interface is easy to learn.  

Cryptocurrency ATMs can be a great starting point for managing crypto. This guide will help you understand what they are and how they work.  

Cryptocurrency ATMs Explained 

Cryptocurrency or Bitcoin ATMs are kiosks you can use to buy and sell crypto for cash. Following the boom of cryptocurrency’s popularity, more than 34,000 crypto ATMs are already operating worldwide.  

Bitcoin ATMs are not your ordinary bank ATMs. You don’t need to connect one to your bank account, and it’s easy to withdraw your funds from these machines. Most users prefer these ATMs to their bank account for buying crypto because they are convenient.  

Instead of a bank account, crypto ATMs are connected to a cryptocurrency exchange. With this, you can buy and sell crypto using fiat currency, including Euros, Canadian dollars, and US dollars. 

One limitation, however, is that these electronic kiosks do not support all cryptocurrencies. Normally, cryptocurrency ATMs only support the most common cryptocurrencies, such as Bitcoin, Litecoin, Ethereum, and Bitcoin Cash.  

How Cryptocurrency ATMs Work 

As mentioned, cryptocurrency ATMs connect to a particular type of crypto exchange. They convert the cash you deposited into the cryptocurrency of your choosing.  The blockchain, the digital financial transaction ledger for crypto, processes all transactions.  

The step-by-step guide on how the process works: 

  1. You deposit your cash.  
  1. You scan a QR code that directs the crypto ATM to your digital wallet. 
  1. The converted cryptocurrency is transferred directly to your wallet.  

A few crypto ATMs permit redeeming of vouchers via a crypto exchange app. The app allows users to deposit funds, select their crypto of choice, and then print the voucher, which they can scan using a mobile app to deposit funds to their digital wallet. 

Additionally, not all crypto ATMs allow you to both buy and sell crypto. Some are limited to buying. 

The Step-by-Step Guide to Using Cryptocurrency ATMs 

Different providers can have varied processes for using cryptocurrency ATMs. But, in general, the following steps can summarize your user experience.  

Step 1: Open a Cryptocurrency Wallet 

Before using a crypto ATM, you need to have a crypto wallet. It’s what you’ll be using in buying or selling crypto funds. Various mobile apps can help you get started in setting up a crypto wallet, but you can also use specialized hardware.  

Some ATMs require you to set up a specific wallet app before making any transaction. This wallet is where the ATM sends your crypto.  

Step 2: Look for the Nearest Crypto ATM 

The easiest way to do this is via an online search. Bitcoin ATMs are located in gas stations, cafes, convenience stores, airport terminals, and downtown hubs.  

Step 3: Look at the ATM’s On-Screen Instructions and Follow Them 

ATM screens will need to verify your identity, often via a code sent by text message. After confirming your identity, the electronic kiosk will guide you in making your first transaction.  

Step 4: Wait for Transaction Success 

Transactions via cryptocurrency ATMs will undergo blockchain verification, which can last from 10 minutes to an hour. You will know the transaction is complete once you see the funds in your crypto wallet. 

The Benefits of Cryptocurrency ATMs 

1. They Are Decentralized and private 

One of the goals of cryptocurrency is to allow transactions without going through financial institutions. Anyone can use cryptocurrency ATMs, meaning you can use these electronic kiosks to buy cryptocurrency even when you don’t have a bank account.  

2. Highly Accessible 

With the rise of crypto, more Bitcoin ATMs are being installed worldwide. This makes crypto more accessible to everyone. Cryptocurrency ATMs are also great entry points for getting started on crypto investing.  

3.Faster than wiring funds 

        The process of buying or selling cryptos in exchange for cash is much faster than a bank wire, or ACH, which can take 24 hours or more to show up in your bank account.  

The Risks of Cryptocurrency ATMs 

1. High Fees 

The most common complaint about crypto ATMs is the high fees. If you’re unlucky, you might encounter a machine charging more than 10 percent in one transaction. This is much higher than the conventional crypto exchange of around 1 percent to 4 percent.  

2. Transaction Limits 

Cryptocurrency ATMs come with minimum and maximum transaction limits. These limits are usually set by the company that owns the ATM. Limits usually come in the range between $10 to $10,000.  

3. Increasing Fraud and Scam Risks 

Due to the ATM’s high anonymity, it’s easier for criminals to defraud victims and make illegal crypto transactions. This is because everything is nonrefundable and hard to trace.  

Scams are also common, especially when someone forces you to send funds into their account using a crypto ATM. One way to avoid this is by using an online research tool for locating ATMs and checking their legitimacy by reading reviews.  

How You Can Make Online Payments with Cryptocurrency

Accepting cryptocurrency payments continues to grow in popularity, but not everyone understands how it works. If you are a business owner and are considering accepting cryptocurrency payments but don’t know where to start, this guide is for you. Read on to learn more about the process of using crypto for online transactions, as well as its benefits and risks.  

How Paying with Cryptocurrency Works 

The process of using cryptocurrency for online payments is as easy as sending and receiving money from a bank account, but it also depends on the crypto platform you choose.  

Setting Up Your Crypto Wallet 

Acquiring cryptocurrency does not necessarily require you to create an account with a company, institution, or other entity. It is, however, easier when you do, especially when you’re unfamiliar with how to set up a crypto wallet.  

If you set up an account with a crypto exchange, you can swap your crypto for cash. Plus, you can also enjoy other features, such as contacting support when you experience issues.  

The only way you can process an online payment using crypto is if you have a wallet set up. You then generate a QR code that links to your wallet and give the code to your customer. They scan the QR code and enter their access key, which acts as a sort of password, and the transaction appears on the blockchain.  

Your wallet is not required to store crypto at all times. You can just use it as a key for making online transactions. Think of it as the email address you should input when sending and receiving crypto payments.  

There are several types of wallets available, and each has its own features. However, not all wallets are compatible with all crypto.  

Sending and Receiving Crypto Payments 

After acquiring a wallet, you can use it to make online crypto payments. In general, you can follow a step-by-step process when sending payments: 

  1. Open your mobile wallet application 
  1. Click the Send Payment button 
  1. Enter the corresponding amount  
  1. Enter the recipient’s wallet address or scan the QR code 
  1. Finish the transaction by clicking the Send button 

Conversely, you can follow this for receiving payments: 

  1. Open your mobile wallet application 
  1. Click the Receive Payment button 
  1. Click the Share Address button 
  1. Accept the payment that appears 

Where Crypto Payments Are Accepted 

Cryptocurrency is growing and changing, and today, many big platforms accept it for online transactions. Most companies that allow crypto payments utilize cryptocurrency payment gateways, which are payment service providers that ensure no price slippage occurs. (Price slippage is the price difference between a crypto’s quoted price and paid cost.) These gateways achieve this by guaranteeing real-time cryptocurrency-to-cash conversion.  

Notable businesses that accept crypto payments include PayPal, Microsoft, Newegg, Starbucks, AT&T, and AMC Theaters.  

The Pros of Using Crypto for Online Payments 

1. Enhanced Payment Security 

Frauds related to transactions made through debit and credit cards are on the rise. More often than not, small businesses are the primary target. Today, more professionals believe cryptocurrency is a safer way of making online transactions.  

For starters, there’s no third-party verification needed. Because no data is stored with crypto, it cannot be breached. Instead, the crypto wallet stores all information collected.  

There’s also the blockchain general ledger. It verifies and records all transactions, and because of its security, it’s almost impossible for bad actors to commit fraud and steal another individual’s identity.  

2. Lower Fees 

Transaction fees are common among online merchants. For instance, PayPal charges 4 percent for every fiat transaction, but it charges a flat fee for cryptocurrency transactions, as low as $0.49.  

Overseas customers can also avoid paying international currency fees when using crypto because crypto is not linked with any national bank or country.  

The Cons of Using Crypto for Online Payments 

1. It Can Still Be Risky 

While crypto is immune from inflation, its value remains volatile and unpredictable. This unpredictability makes most business owners hesitant about utilizing it for online payments.  

2. They Are Not Exempt from Tax 

Cryptocurrency payments are reported as gross income. These are based on fair market value during the time these payments are received.  

Every time you use crypto in buying or selling, it’s subject to capital gains tax. And according to the IRS, it’s important you keep track of the crypto’s value during the day you received and sold it. If you’re receiving multiple crypto transactions daily, this can get complicated.  

3. Crypto Transactions Are Irreversible 

All cryptocurrency payments are permanent. When customers ask for refunds, it’s your duty as a business owner to keep track of all your records and identify the crypto’s corresponding value.  

This can cause inefficiencies and additional work for your business staff, especially when you need to issue several refunds.  

They Are Unregulated  

After completing an online transaction using crypto, the blockchain locks it. As mentioned, every purchase made is permanent and cannot be undone. Cryptocurrencies are also not backed, regulated, or guaranteed. If you experience scams or fraud, there’s no guarantee you can get your money back.  

A Five-Step Guide to Retirement Planning

As you grow older, your needs and responsibilities increase. One of those responsibilities is saving enough money to enjoy your golden years.

If you’re starting to think about building up a nest egg and saving for retirement, this guide is for you. Here’s a five-step guide to retirement planning in 2022.

How Much is the Best Amount for Retirement?

Before delving into the five steps to plan for retirement, it’s important to get an idea of how much money you’re actually going to need once you stop working.

Knowing how much you should save for retirement involves thinking about the following factors:

  • Housing costs like mortgage, rent, heating and cooling, and maintenance
  • Health-care costs, including retirement medical expenses and potential long-term care costs
  • Day-to-day needs, such as transportation, clothing, and food
  • Your entertainment, such as movies, theatrical plays, shopping, and restaurants
  • Travel costs, including hotels, flights, or gas for day trips
  • Life insurance (if you have it)

Of course, there’s no right or wrong amount to save for retirement. But, some financial experts revealed that individuals need roughly $1 million to $2 million. Other advisors recommend saving more than 80 to 90 percent of your pre-retirement income.

Just remember that these are only guides. Your particular situation could require more or less cash for your golden years.

The Five Steps to Successful Retirement

No matter how much you decide to save, the end goal is the same: to have enough money to sustain your way of living.

That said, let’s dive deeper into the five essential steps to successful retirement planning.

Step 1: Think About When to Start Saving for Retirement

The first thing to think about when saving for retirement is when to start saving up. Much like with how much to save, there’s no right answer to when you should start saving.

But, the sooner you start, the more time you’ll have to build up a nice nest egg that can get you through your golden years. The power of tax deferred compounding over time argues for an earlier start to your retirement planning efforts.

However, even if you don’t start planning early, it’s never too late to start. The key is to simply find a jumping off point and to make a plan that will help you continually maintain your savings.

Step 2: Think About Your Lifestyle

The exact amount of money you’ll need for retirement depends on your lifestyle, needs, and responsibilities.

The amount you need is the relationship between your expenses and your current income. For instance, let’s say you typically spend $2,000 a month on your current lifestyle. You’re going to want about that same amount in retirement, as well.

Make a clear outline of what your monthly expenses are and how much you’ll need to sustain them. That way, you can come up with a clear plan for what you’ll need in the future.

Step 3: Prioritize Your Financial Goals

It’s normal to have various financial goals aside from setting up retirement funds. If you have more than one, you’ll need to know how to prioritize them even as you save up a nest egg.

Financial goals can include the following:

  • Paying off credit card debt
  • Paying off student loans
  • Setting up emergency funds
  • Paying off a mortgage

Once again, you’ll need to sit down and budget out how much cash you want to put toward each expense. That way, you’ll be able to continue meeting your current financial goals even as you save for your golden years.

Step 4: Research Various Retirement Plans

Another crucial step to retiring is knowing the best retirement plan for your needs. There are tons of different plans out there, and each one works a bit differently.

Choosing the right retirement plan really depends on your situation. For instance, if you have any kind of employer retirement plan such as a 401(k), you can always start there. But if you don’t have one, consider opening a new account for retirement.

As you choose a retirement plan, look for the different advantages and tax incentives. These can help you pick a plan that will help you get the maximum savings.

A few retirement plan options you can check out are:

  • Traditional or self-directed IRA
  • Roth IRA
  • Solo 401 (k)
  • 401k or 403B

Step 5: Create a Varied Portfolio of Retirement Investments

Once you have set up a retirement account, it’s time to choose a good blend of investments. These can include mutual funds, bonds, stocks, real estate, or commodities.

These types of investments can serve as supplemental income to your retirement fund. They can be a great way to help you gather additional funds that survive market fluctuations and inflation, and provide you with a livable income once you retire.

Retirement investments don’t need your constant babysitting. You can always start with low-cost mutual funds when managing your retirement funds. Plus, you can also hire a professional financial planner to make things easier.

Final Thoughts

Planning for retirement at an early age is the best way to enjoy your life as you age. It also makes you more carefree about spending your money and fulfilling your goals. Modern retirements can last for 25-35 years or so. It is important to not underestimate how much money you may need to accumulate for that potentially long retirement period.

With these five steps, you can start setting aside enough cash to support your lifestyle once you’re ready to retire.

The 4% Rule for Retirement: What Is It and How to Use It

Retirement is an exciting prospect until the time comes for you to consider saving and having adequate financial funds that last as long as you do!

How much do you have for your future? How should you spend and save your money? These are all essential questions when thinking about your retirement fund.

A good rule of thumb to follow when preparing for retirement is the 4% distribution rule. What is it, and how does it work? Let’s discover all about it in this guide.

The 4% Retirement Rule Explained

The 4% retirement rule helps dictate how much you can withdraw and spend annually from your retirement savings. There are of course nuances to this rule, but it helps maintain a sustainable account balance for the years after your retirement.

According to this rule, you can withdraw as much as 4% of your total savings during your first year of retirement – for the succeeding years, you simply adjust depending on inflation.

Background on the 4% Rule

Let’s look at a brief history of the 4% rule. It all started with a Southern Californian financial adviser, Bill Bengen. He created this concept during the mid-1990s using historical data from his bond and stock returns which he collected over a 50-year duration.

Bill Bengen also utilized data from severe market downturns which happened during the 1930s and 1970s. According to him, withdrawing 4% annually from a retirement funds is a safe amount to tryto cover all your expenses.

How Bengen Tested the 4% Rule

Bengen used retirement data from 1926 through 1976. He analyzed the withdrawals made every year and observed the rebalancing of the portfolio in question.

Bengen also examined the longevity of these portfolios. He checked whether someone’s portfolio who retired in 1926 lasted until 1976.

From the results, he discovered that withdrawing 4% initially can help portfolios last for fifty years. For those that did not, the portfolios can still last for at least 35 years.

The Pros and Cons of the 4% Rule

The 4% rule is not a guaranteed regulation that ensures your retirement funds will last forever, but it’s a great suggestion, especially when you want to keep your savings steady.

The rule is easy to follow, and if it really is successful for you, it might protect you from experiencing a funds shortage during your retirement.

As mentioned, it’s not guaranteed, and there are also risks you must be aware of. For instance, the rule is a somewhat dated recommendation. It factored in past market trends, so it’s not 100% certain that it could predict what happens in the future.

Remember that change is constant, and the world continues to evolve. The strategies that worked in the past might not work in the future, especially if market trends and conditions change. For example, bond yields fell very significantly after the 2008/2009 market crash, and the Federal Reserve kept interest rates artificially low for the next 12 years, so that a 4% withdrawal rate on a portfolio that included a good amount of bonds would not have worked too well-you would have eaten up too much of your capital base. The “safe” withdrawal rate for that period of time was more like 2.8%–not 4%!

Moreover, the 4% rule does not include taxes. Let’s say you’re withdrawing $4,000 from your IRA. You must remember that you must also pay state and federal taxes on top of the $4,000. After paying taxes, you are left with a lower amount for spending.

Another possible risk is the mix of investments. The success of the 4% rule also depends on your savings investments. It assumes that you have at least 50% stocks, including a mix of diverse stock index funds.

If you have that kind of mix, then your return can match the overall market, but if your portfolio has a different set-up, you may have a different rate of return. This means you could have a higher or lower amount for withdrawal.

Another disadvantage of the 4% rule is that you need to strictly adhere to it for the entire year. If you violate it and splurge, this can result in various consequences and reduce your principal.

Is Using the 4% Rule Recommended?

If you want a simple guideline to use for your retirement funds, the 4% rule is good enough, but it’s not the best system for everyone. You should consider the following factors:

  • The kinds of investments you own
  • All your sources of income
  • How long you’ll live
  • The tax rate you receive after retiring
  • The rate of inflation

Don’t forget that your needs might also change every year, especially when you stop working. There is no guarantee that you’ll withdraw the same amount for consecutive years.

Also, by the time you reach 72 years old, the 4% becomes even more useless. It’s the time when you start withdrawing from IRAs or your required minimum distributions (RMDs).

Your RMDs are calculated using a formula requiring you to withdraw more than 4% as you age.

Alternatives to the 4% Rule

If you want more dynamic retirement planning schemes than the 4% rule, you have a wide range of options.

For starters, Boston College’s Center for Retirement Research created a system basing your annual retirement withdrawals on the minimum distribution tables from RMD.

So how does the system work? Your account balance is divided by the distribution period corresponding to your age in the proposed table. This will tell you how much you can withdraw each year.

The Center for Retirement Research calculated a safe 3.13% withdrawal when you reach 65 and a 15.67% withdrawal by the time you reach 100.

Like the 4% rule, there are also risks of changing market conditions in following this rule. Plus, it limits your withdrawals when you’re younger. This means it might be hard to follow when you tend to spend more, but this alternative is more flexible because you can spend earned dividends and interest on top of the recommended percentages.

Another great approach is talking to a financial advisor who is certified in retirement income planning. You can share your savings plans for retirement and your ideal spending habits. An experienced advisor can help you determine the best amount to spend and save every year.

The Bottom Line

The 4% rule was created in the past, factoring in historical market trends and performance. While it can be a good guideline to start saving during retirement, it does not guarantee it will last.

Developing a more personalized withdrawal strategy with professional guidance is the best way to save and plan for your retirement. Consider your investments, how you spend, and the taxes you should account for. Everything is dynamic, and your withdrawal plan should be able to adapt to the constant changes.

Spotlight – What Do You Need to Know about SEP IRAs?

A report dated 2021 created by the Pew Research Center stated that 16 million people in the US are self-employed. This means they are not eligible for a retirement plan from their employers. Thanks to SEP IRAs, self-employed individuals now have an additional savings option to boost their retirement plans. The SEP IRA has a competitive maximum contribution as well as remarkable flexibility.  

But what exactly is a SEP IRA? And how does it work? Let’s learn all about it in this guide.  

SEP IRA Explained 

The Simplified Employee Pension Individual Retirement Account, or SEP IRA, is like a traditional IRA with more perks. It’s a tax-deferred retirement plan for people who are self-employed, business owners, employers, and those who engage in freelance work. Contributions made to a SEP IRA are considered employer contributions. It’s designed for simplicity, especially when you run your own business and have no—or relatively few other employees.  

How Does a SEP IRA Work? 

SEP IRAs are excellent retirement plan options because they are flexible, low cost, and easy to set up and manage. Also, they have more generous contribution limits and tax benefits than other retirement savings vehicles. You don’t need to worry about the operating and start-up costs associated with conventional employer retirement plans.  

SEP IRAs have the same tax treatment and investment options as most traditional IRAs. Both IRAS also have similar rollover and transfer rules. Also, employers receive a tax deduction for every contribution made to an employee’s account. And the amount of contribution can be different every year.  

SEP IRA Contribution Limit 

You are allowed to stash as much as $6,000 every year into traditional IRAs. But, with a SEP IRA, you can invest more than 10 times that amount. Just be aware that SEP IRAs also have annual contribution limits. You cannot exceed 25 percent of compensation, or $58,000 in 2021 and over $61,000 in 2022. Contributions must be identical percentages for all recipients/employees. 

Advantages of a SEP IRA 

SEP IRAs are very convenient for the employer. Everything is simple, easy to set up, and easy-to-navigate. Every contribution is tax-deductible for the employer, and it’s flexible. No commitment to a specific yearly contribution amount is needed.  

Disadvantages of a SEP IRA 

SEP IRAs have various disadvantages which you should be aware of. Firstly, only the employer can contribute. Additionally, the SEP IRA does not have a Roth option. This means that you must pay taxes on your distributions. Additionally, once you reach the age of 72, you must take required minimum distributions ( RMDs) . However, you can convert the SEP IRA account to a ROTH IRA at any time, and thereby avoid all future taxation and all future RMDs.  

How to Start with a SEP IRA 

If a SEP IRA sounds like it might be a good move for you, you can open one pretty easily. All you have to do is follow these three steps outlined by IRS: 

1. You should have a formal written agreement. This is done by filing IRS Form 5305-SEP. If you have an account provider, or IRA custodian,  they can help you.  

2. Let your eligible employees know about your plans to apply for a SEP IRA. You can provide them with a copy of your IRS Form 5305-SEP.  

3. Create separate SEP IRA accounts for yourself and eligible employees through your chosen account provider.  

Investing Using a SEP IRA 

The investments you make in your SEP IRA account depend on your current age, your anticipated retirement age, and your risk tolerance. Before choosing your investments, you should have an idea about what your future needs will be. Most asset allocation models would suggest weighing retirement portfolios toward stocks when you’re younger. As you grow older, you can start reducing your portfolio risks. Then, it’s time to boost your income component by rebalancing.  There are almost no limits on what you can invest in, in your SEP IRA accounts. It is best to utilize the services of a professional advisor as well.  Retirement planning and asset management is generally not a do it yourself situation for most people! 

Withdrawing Money from a SEP IRA  

If you want to withdraw your contributions before you retire, that’s a possibility with this type of IRA. However, any amount you withdraw serves as taxable income. This means that you should set aside an appropriate amount based on your current marginal income tax rate. The distribution or withdrawal can also be subjected to an additional 10 percent penalty tax if you are under age 59 ½. Contacting your tax consultant is best if you’re considering withdrawing before retiring.  There are ways to avoid the 10% early withdrawal penalty with proper planning as well. 

Alternatives to a SEP IRA  

While a SEP IRA is an excellent option for people who are self-employed, it’s nice to look at the following alternatives: 

SIMPLE IRA: Ideal when you’re a small business owner with fewer than 100 employees. 

Defined Benefit Plan: This plan locks you into minimum annual funding regardless of market performance. 

Solo 401(k): Great for flexible and tax-deductible contributions. However, it comes with more maintenance and set-up fees than other options. 

Profit Sharing Plan: A plan that lets you contribute when and how much you want. 

The Bottom Line 

A SEP IRA is ideal for self-employed individuals looking for tax-advantaged retirement savings vehicles. This unique IRA allows you to contribute significant amounts every year. You can watch your savings grow, tax-deferred. Carefully weigh the factors and decide whether an SEP-IRA might be the right choice for you.