Retirement planning starts long before retirement age for most people, but the decisions don’t end when pension payments begin. Receiving Social Security retirement benefits is not enough for everyone to live their later years the way they want to, and that is where retirement investments come into play.
Even if you have saved hard during your life and made good investment choices earlier in life, there are still ways to increase your savings after you retire. Here is an overview of why post-retirement investments are worth considering and some strategies you can consider.
Why Invest Your Retirement Savings?
Making your retirement money is easier said than done. With the best of intentions, funds can dwindle faster than you may expect. Luckily, there are plenty of options available to help your hard-earned cash go further once your usual income stops.
A financial advisor can advise on the many ways to invest your retirement savings and what may work best for you, but most will agree that it is a good idea to have some sort of strategy in place.
Some of the reasons people should consider investing their retirement money include:
- Allowing you to live more comfortably in your retirement
- Providing extra funds to cover special treats and tick the big things off your retirement bucket list
- Protecting your wealth
- Having something to leave behind to loved ones even after enjoying a long and happy retirement
- Cover yourself in case of unexpected events and expenses
- Give yourself regular income payments on top of your standard pension
- Maintain more control over your wealth for longer
In short, investing after retirement can improve your lifestyle, relieve financial pressure, and give you that little extra wiggle room for when life takes unexpected turns.
Things to Consider when Deciding on an Investment Plan for Your Retirement Accounts
Choosing a retirement investing strategy is personal, and what works best for someone else may not be the right choice for you. It depends on your current situation, total savings, risk tolerance, and the type of lifestyle you plan to lead during your retirement.
At the end of the day, not having a fixed income through work changes things for everyone, no matter how comfortably they have set themselves up through life savings. When figuring out what to do with those retirement accounts to sustain you over the years, there are a few important things to consider.
- Decide what is most important to you: preserving the capital you already have or creating additional income.
- Consider whether you are comfortable with riskier investments with the potential for higher returns.
- Calculate your predicted average annual spend and roughly how many years your retirement is likely to last. Does the money you have now cover it and leave you with extra, just in case?
- What asset classes appeal to you, and how can you create a diversified portfolio to protect your savings?
Here are a few more details about the most important strategic decisions in post-retirement investments and how you can implement them in your financial planner.
You Need to Preserve Capital.
Cash flow is vital in retirement. Since it isn’t coming from a job, it needs to come from your savings. To that end, it is pretty important to conserve what you have so you don’t run out. Some people who believe they have enough savings to cover themselves comfortably don’t feel they need to make new investments to bring in high returns. Instead, they focus on stretching their money as far as possible so it lasts until they no longer need it.
You may think that keeping it safe and sound in a savings account is the best way to do that. Yes, a savings account is more than adequate, but there are better ways to do it. Good examples are mutual funds or a bond. Mutual funds and bonds are low-risk investments that preserve funds, generate low capital returns, and act as hedges against inflation. They won’t bring in big bucks on the profitability scale, but they will appreciate a bit better than a simple savings account could.
Think About Investments that Can Boost Your Retirement Account.
Let’s say you have tallied up your money and compared it to your expected retirement expenses, and the numbers just don’t add up. You can either panic, cut down your spending, or look for investments that could possibly give you the boost you need.
There are plenty of investment options for people looking to generate income through high returns, but they tend to carry a higher risk. Look into the options, and think about how much risk you are willing to take.
Keep Risk and Reward in Balance.
Speaking of risk, let’s not forget that these are your hard-earned savings, and your investments are never guaranteed to bring in decent returns. Some asset classes are riskier than others, and you must pick investments you know you can cover if things don’t go the way you hoped.
There is nothing wrong with taking a little risk. It is, after all, how people end up gaining good sums of money. However, going too risky could mean it ends up costing you and you don’t have new income to cover the loss. The answer is to balance your portfolio to have a bit of both and choose diverse investments.
Three of the Best Investments for Retirement Savings
Invest in the Stock Market
The best way to boost your retirement portfolio is through stock market investments. Stocks are the leading investments for all ages, and there is such a diverse range of possibilities that there is something for everyone. If boosting your funds is the primary goal, this is the way to do it.
Due to the nature of stock investments, there is a higher risk factor involved than some other more reliable assets. That said, the return potential is also greater. Finding that balance is the key!
Bonds and Mutual Funds
Bond funds are also called Debt funds. They are pooled investments (money from multiple investors) into bond assets such as governments and corporate debt instruments. The idea of these investments is to pay out regular dividends to investors through interest. Bonds and bond funds are some of the least risky ways to use your retirement funds because.
If your risk tolerance is especially low, but you still want to earn dividends, investing in a treasury bond is the best way forward. These are essentially risk-free since they are backed by the government and your money is guaranteed to come back to you. It is also a good way to secure regular income payments that you can rely on.
Get into Real Estate
Real estate is a fairly common route for retired investors. Even if you don’t have the funds to buy additional properties, there are other ways to get into the housing market and make a little money from it. You can buy into real estate stocks- combining the first two strategic options- or buy storage facilities to rent.
Another option that has gained some popularity in recent years is house flipping. People buy cheap properties that need work done, do the work, then sell them for profit. Some retirees take on these projects not only for income but also to give them a challenge! Others invest in house flipping projects and gain interest once the house sells.
A diverse retirement investment portfolio is the key to managing savings, wealth, and additional income in your later years. Making investments after you retire can give you more flexibility and freedom to enjoy this time of your life without worrying too much about overspending.
Working with a certified financial planner can help you find a strategy that works for you. Your hard-earned savings may be able to go further than you think!