Use Direct Stock Purchase Plans for Retirement Planning

By: Joe Mathews

Most of the people want to have a steady source of income after retirement. For retirement benefits they have to consider everything including setting goals for the retirement date, projecting their income and living expenses, and then applying and tracking their investment made through direct stock purchase plans.

It also covers making the most of the retirement benefits that their employer provides, such as employee pension plans and tax-deferred savings, like 401(k) plans. Even if you are an independent employee, many retirement savings plans like SEP IRAs and profit-sharing plans are easily available.

Your retirement planning also involves keeping a watch on the tax and cash flow maintained through your Social Security programs and tax-deferred savings plans, different IRAs, stock investment options, direct stock-purchase plans, and deferred compensation tax rules.

These are direct stock purchase plans which allow you to buy shares with your own funds, either at a discounted price or current market price. Sometimes, employers will give you non-recourse or below-market loans to help you buy the stock market shares. You can keep hold of the stock shares just like other holders of the same social security program. However, the reference is not given here to any ESOP or tax-qualified direct stock purchase plans, in which you can purchase shares through after-tax payroll deductions.

Many companies encourage you to buy their stock shares through direct stock purchase plans. They do so with an objective to convert an investor into a permanent customer with a suitable stock purchase plan. For instance, if you hold shares in a company possibility is there that you would like to deal in that specific brand than using any other brand products or service. Additionally, direct stock purchase plans give investors an easy way to make money for retirement days and allow companies to make significant profit from their stock offerings.

Significant benefits of direct purchase plans

Direct purchase plans offer three major benefits over purchasing shares from any stock broker:

Teenage investors can participate in them: Direct Purchase Plans are not restricted to any specific age group. There are several companies who allow people to purchase additional shares (fractional or full shares) with these Plans and earn a minimum amount of $10 once they subscribe their plans. They can invest as much or as little as they want after signing up an account. In fact, they have an option to buy fractional share if they canít afford to purchase a full share.

Reasonable fees: The fees required for making investment in direct stock purchase plans is less as compared to a stock broker. There is a one-time fee of $5-15 for setting up an initial account. The fees for some investment plans charge vary in between 3-15 cents for purchasing every stock, while a few others charge $2 or even more.

Dividend reinvestment facility: Stock shares give dividends each 3 months period. The shareholders can reinvest it in the companyís share instead of taking it away. Based on the power of compounding, the reinvested amount is able to generate you higher returns.

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Joe Mathews has been working as a stock market expert and giving useful insight on direct stock purchase plans. He identifies these plans as useful alternatives for retirement benefits.

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