What is the best investment options for retirement?
April 8. 2019. Article By TopInsura.com Investing Editors:
No matter how much you may love your job, it’s always a good idea to prepare for the day you retire. Get ready for your retirement by saving, investing, and getting the best return on your investments. With all of the options available, what is the best investment options for retirement? Here's how to reduce your portfolio risk and earn steady investment returns in retirement.
Why you should have a retirement plan
When you retire from your career, the amount of money you may receive as a pension might not be enough to cover your monthly expenses. Sometimes, companies end up laying off workers who are nearing retirement age with little or no lifelong benefits. Even if your home is paid off, and you have no other major debt, you still have bills that you must pay. As you age, your health costs typically become higher and more frequent. If you need to move into a nursing home or want to move into a retirement community center, you will want to have the peace of mind that you have a steady stream of income to cover these late-in-life expenses. In addition to these practical expenses, if you have children or someone you want to leave an inheritance to, you need a retirement plan.
Best investment opportunities options for retirement
There are many investment opportunities for retirement from which to choose. Deciding on which one is best for you will depend on how much money you need, how old you are now and when you plan on retiring. Additionally, your personality will play a part in that some will need to opt for a sure thing even though the amount is less because they would spend too much time worrying about possibly losing their savings. Others have the funds or like a challenge of higher risk investments.
You’ve probably heard it said, but it’s true. The best way to invest is to diversify and not depend on only one method of savings for your entire retirement funds. Balanced mutual funds are a way to invest in both equities and bonds which makes them less volatile. Another consideration is taxes. Higher tax bracket investors benefit from using tax-exempt mutual funds and staying up to date on changing tax laws to avoid being penalized.
One of the safest and most conservative methods is through a CD or bonds. A Certificate of Deposit offers higher rates than a traditional savings account but do require that you commit your money to a certain length of time. Maximize your earnings by building a CD or bond ladder. Both work similarly. With bonds, purchase several bonds that mature on different dates. With a CD, invest in one, two, three, four or five-year Certificates of Deposit. When your first CD expires or bond matures, you spend or reinvest it into another CD or more bonds at a longer maturity rate than your current longest CD term or bond maturity rate.
Best Retirement Investments for a Steady Stream of Income
Sure you can make long-term investments, but once you cash them out they’re gone. It’s a good idea to also have a steady stream of income after you retire. Bond ladders and CD ladders can be a good way of keeping up a steady source of income. Though not for everyone, another way to do this is to go the real estate route by purchasing and renting out rental properties. If you don’t want the hassle of being a landlord, consider real estate investment trusts REITs which uses professionals to manage the properties while you receive profit.
Another stream of income could come from immediate annuities which is really a form of insurance but provides you with guaranteed income when you need it. A ten-year term, for instance, provides you with a stream of income for ten years.
Retirement income funds are a type of mutual fund that automatically invests your money into a diversified portfolio of bonds and stocks. The idea is to produce a monthly income after you retire.
One of the best retirement investments available, when done properly, is a total return portfolio. This form of investment is really a strategy that works with balanced, diverse blend of stock and bond index funds to provide income during retirement from the interest, dividends, and capital gains. The only possible downside to a total return portfolio is that the return amount is not constant. One year it may be 10 percent and the next year down to 8 percent. The idea is to approach it as a total average return.
Financial retirement planning online
With a digital society, a lot of banking, stock trading, and mutual funds have moved online. Many places to invest offer a physical building in addition to an online presence. Some banks are even able to offer more of a return since they have no brick and mortar overhead to maintain. Don’t be afraid to plan your funds for retirement in this manner. Just be sure to check out the reputation of any company you are considering investing with, and don’t put everything you have in one place regardless of whether it’s online or not.
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