In today’s post, we shall take a look at the best investments for retirees. There comes a time when those in their golden years or heading to their golden years have to think about sustainable investments that will fund their lifestyles. In a world where many options are available, it is advisable to exercise caution, since not every investment is viable or good for everyone. Herein, we shall take a look at the viable options that are generally suitable for most retirees across the board.
Real Estate Investment Trusts ( REITs)
REITs invest in mortgages as well as direct equity positions in a variety of properties. The good thing about these investments is that they are required to set aside about 90% of their taxable income as dividends to be shared out amongst investors, which makes their dividends higher than what one can expect from stock dividends. REITs are also suitable retirement options owing to the fact that properties can be developed and sold and the money redeployed into other properties that have higher expected returns. They can, as such, be a great addition to retirees ’portfolios. Some of the most outstanding REITs in the USA include:
- American Tower Corp – yields about 2%
- Crown Castle International -yields about 3%
Retirees can also benefit from having precious metals in their portfolios. Precious metals, moreso those invested through a self-directed IRA, act as an anchor during seasons of economic turmoil. Assets such as gold, silver, platinum, and palladium ( their IRA-approved versions), have historically been used to counter inflationary forces.
Investors who are aware of this have about 5% to 15% of their retirement investment funds held in precious metals, to counter any losses that may arise from the decline in value of their paper assets ( e.g. stocks, EMFs, mutual funds, etc).
Not forgetting that precious metals are perceived as valuable assets to hold during times of geopolitical instability, such as when there is political tension, or there is war, simply because they act as a store of value.
If you are interested in finding out about what it takes to own some gold or silver as part of your retirement investment portfolio, you can read about it here.
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Stocks that pay dividends have shown great promise as far as offering stability in the often-tumultuous world of equities is concerned. The dividends from such stocks are often higher than those obtained from safer investments such as treasury notes, and certificates of deposit, more so now that interest rates are historically low.
Whereas owning the stocks means that the investors will be exposed to certain risks, dividend payers also get the chance to earn some money regardless of whether their stock prices rise. The combination of their price growth potential as well as stocks enables the stocks to steer clear of inflation.
Companies that have a long track record of making dividend payouts even during the worst financial years (e.g. during stock market crashes), offer great peace of mind to retirees. Firms such as Procter & Gamble have made dividend payouts consistently for over 60 years.
N.B. It is advisable for an investor not to put over 3% of their money in an individual stock.
Annuities exist as investment contracts between an individual and an insurance company. They exist in different forms and present the promise of a guaranteed return at a stipulated rate. Common types of annuities that investors turn to in the market include:
- Fixed annuities
- Fixed indexed annuities
- Variable annuities
- Immediate annuities
- Deferred annuities
Annuities have a higher income generating potential than investment vehicles such as bank certificates of deposit. With fixed annuities, you are guaranteed a payout of the principal invested, along with a minimum interest rate, as well as regular payouts made within a defined time horizon. You should, however, pay attention to the fees and commissions the annuity charges, since they can be too high. Most annuities also have complicated features, which call for you to fully understand the product before whipping out your checkbook or making your first payment.
While it is a good idea for retirees to mainly have their investment portfolios filled with low-risk assets, it is still a good idea to get some exposure to digital assets such as cryptos. It is clear that the world is digitizing many aspects of life at a very fast rate, which makes it necessary for every retiree to think about digital assets that will run the future.
A significant number of financial gurus, including renowned investor Mark Cuban, recommend having about 1% to 10% of one’s portfolio exposed to cryptos. Whereas these coins may be too risky for retirees, picking the right combination of digital assets may present you with an opportunity to also reap big in the future.
As a retiree, you can actually use a tax-advantaged individual retirement account referred to as a cryptocurrency IRA, also known as a Bitcoin IRA, to buy some digital assets.
You can also invest in real estate to ensure that you have a steady cash flow from your property. There are many approaches to earning an income in this industry, including purchasing a piece of land and holding on to it until its value increases significantly so that you can sell it for a profit.
You can also purchase a house, remodel it, and sell it off for a higher value. If you have managed your finances wisely and you have a substantial amount of savings, you can also purchase many units, rent them out, and then enjoy a monthly income.
Interesting Read: Gold vs. Real Estate | Let´s Compare Them to Decide a Winner
As a retiree, you probably have a wealth of experience in a particular field. If you still have some love and passion for your profession, then you can identify a niche that you can exploit, and earn some money.
Since you are in your golden years, you might want to keep off from the strenuous work, and you can possibly just spare a few hours daily to follow up on the progress of such a business. However you structure your business is up to you, but you should be sure to enjoy your golden years.
Frequently asked questions on “investments for retirees”
1. Can retirees invest?
Yes. As a retiree, you are likely to start receiving income from previously funded retirement plans. Instead of spending all the money to fund your lifestyle, you can channel it into other investments that are more stable and reliable, so that you can get better returns, and probably more of them, depending on how you strategize your investments.
2. Where should I invest my money after retirement?
There is no rule stipulating where you should channel your retirement funds, but it is always a good idea to consider creating a diversified portfolio of assets. The type of assets you invest in will be determined by several factors, including your overall financial goals and objectives. Avoid putting all your money into a single asset.
3. What is the best investment for me when I retire?
The No. 1 investment for retirees changes from time to time. It also differs from retiree to retiree. The asset that is best for you may not be best for another retiree, so you need to match the investment with your needs. You can also consider what the investment has to offer within the context of the economy. Precious metals may, for instance, help you to counter inflationary forces, and cryptocurrencies may bring with them a greater potential for higher returns.
4. How much money should I invest as a retiree?
The investment needs of every retiree are different. You may need to take to a financial advisor to guide you on how you should go about investing as a retiree, to ensure that you do not expose yourself to unnecessary risk. Hiring a financial manager may come at a fee, but it will be worth every penny if it offers you the clarity you need to create a well-balanced portfolio.
That will be all for this post on the best investments for retirees. I hope it was helpful and informative, and that it will enable you to get started with planning on how you will distribute and invest your retirement funds. Let me know if you have any questions pertaining to what I have discussed herein.
I wish you well,
Eric, Investor and Team Member at Gold Retired!