Retirement is the time to take stock of your nest eggs. The challenge lies in finding the right investment that meets your needs and helps sustain your lifestyle for a lifetime.
Now that you are free from career and work responsibilities, it is time to take care of yourself and make smart investment moves. Retirees do not need any complicated investment plan. They just need a plan that can help them to maintain their current lifestyle with a steady flow of income. Here are the best investment ideas for retirees.
Make the best of your existing investments
Once you are a retiree, it is practically impossible to earn back the nest eggs that you once earned. It is in your best interests to make the most of existing investments. Stay invested in funds that will help sustain your lifestyle for a lifetime.
Invest in municipal bonds
Investing in municipal bonds issued by a state or the county helps you earn tax-free interest at the federal level. Municipal bonds have high yields compared to 30-year U.S. Treasury bonds. Moreover, if these bonds are issued by your state, you may be eligible for state and local tax exemptions.
Opt for mutual funds
At the age of 65 years, mutual funds can serve as a cushion of risk-free investment. Select mutual funds that have a diversified portfolio comprising stocks, bonds, and cash to withstand any volatility without affecting your returns. Vanguard Target-Date Retirement Option is perfect for retirees. Its portfolio comprises 51% in stocks and 49% in bonds, a great spread of risk and returns together.
Consider the real estate investment trust
A REIT (real estate investment trust) invests in mortgages or property equities, thus providing ample opportunities to retirees to invest their money in return for a higher yield than stock markets. A REIT is a good option for those retirees who like to stay away from the ups and downs of the stock market.
Opt for treasury inflation-protected securities
TIPS (treasury inflation-protected securities) is one investment that beats inflation. Investors can invest in denominations as little as $100 for terms of five, ten, or thirty years. TIPS is a U.S. Treasury debt that pays interest and adds to the principal to account for inflation.
Choose close-ended funds
Close-ended funds (CEFs) are looked at as valuable sources of income by retirees. They offer good yields and returns but are not devoid of risks. Often, CEFs are associated with problems related to liquidity, and investors feel trapped. Fund managers use leverage to purchase more securities with more income possibilities. Some retirees prefer CEFs as their retirement investment. Consult your financial advisor before investing in CEFs to obtain better returns.
Many retirement fund options are available. However, there is no perfect investment that works for all retirees. One must evaluate the pros and cons of each investment option before making a decision. Every investment entails some risk. Understanding the risk factors associated with each investment will give help retirees compare different options and choose one according to their risk appetite.