The older investors get, the more careful they tend to be with their money. It is not the bravado of the youth that vanishes, it is a good strategy.
After all, it’s one thing to play fast and loose when you’re young, but investors nearing retirement don’t have much time to catch up on bets that have gone bad.
Sadly, many Americans today don’t have the luxury of doing what worked for their parents and grandparents. In fact, switching to ultra-conservative investments might be the riskiest thing you can do.
Of course, you probably won’t lose money playing it safe, but in today’s environment, you might not be making enough money to last until you retire.
What changed ?
The first problem Americans face is a good problem: we are living longer. The current life expectancy in the United States is around 79 years. Thirty-five years ago, when you may have started planning for retirement, life expectancy was less than 75 years.
Government data shows that seniors spend an average of $ 50,000 per year. Therefore, if you still want to retire on time, your investments will have to make up the difference.
The second problem does not have as much of a bright side: weakening returns on safer investments.
Historically, people nearing retirement have spent more of their money on ultra-conservative options like bonds, certificates of deposit, or even just a money market account. None of them pay like before.
Consider the 10-year Treasury note. In 1981, the yield peaked at 15.84%. No one would laugh at putting your retirement money into such an investment.
But by the end of the decade, it had fallen to 9.5%. Now it’s under 1.5% – not much better than some savings accounts.
It is the same for CDs. Savers had access to double-digit returns in the 1980s, and as late as the 2000s, a one-year CD could earn between 1.5% and 5%. Now you would be lucky to find a return as high as 0.45%.
What options do you have?
Fortunately, living longer also gives retirees and those nearing retirement more time to make slightly riskier investments.
Here are five options to consider that can deliver reasonable returns – without taking a bet you can’t afford.
Whole life insurance
Whole life insurance gives you lifetime coverage for your family – and in addition to the insurance component itself, you will have “cash value” to build on.
A portion of your premiums is allocated to the cash value component, which is invested and grows at a guaranteed and constant rate. The income from your money is tax-deferred.
When you buy whole life insurance, you can borrow against the cash value, use it as a source of income, use it to pay policy premiums, and even trade it in for a larger death benefit for your loved ones. .
And if you opt for a “participating” contract, you will also share the profits of the company in the form of dividends.
Annuities are contracts sold by financial institutions or insurance companies. They are designed to help people cope with the prospect of outliving their retirement savings.
Once they reach the payout stage, you will receive an income stream for a predetermined period or your entire life. They come with various fees, so you’ll want to read all of the terms and conditions before choosing to invest in one.
If you run into trouble at the start, you won’t be able to access the funds without a penalty, so make sure you have other sources of income during this time.
Investing in farmland has proven to be a successful strategy for one of the richest men on the planet, so it’s definitely worth a visit.
The great thing about this asset is its intrinsic value: even when the economy is in ruins, people still need to eat. Yet studies have also shown that farmland can offer better returns than bonds, gold, and often the stock market.
With the help of a new investment platform, you can pool your funds with other investors to buy stakes in individual farms without having the responsibility of managing them yourself. In return for your investment, you’ll get a reduction in rental fees and crop sales – earning a pretty penny as the asset continues to rise in value.
Dividend paying stocks
Dividend-paying stocks provide investors with a relatively stable source of income. Companies offering this type of stock will distribute a portion of the company’s profits to shareholders on a regular basis, usually quarterly.
You have two ways to get them: either through dividend funds or as individual stocks.
There is some risk that you take by investing in stocks, but there is also a good gain if the stock price goes up. If you are particularly risk-averse, dividend funds help offset the risk of a large loss by making sure you have other stocks to lean on in the fund if one dips.
Real estate investment funds
The real estate market is only getting hotter, but buying a second property takes a huge amount of capital. In addition, you are trying to retire and not take on the part-time job of an owner.
Real Estate Investment Trusts (or REITs) offer ordinary investors the ability to effectively finance the purchase of residential homes or commercial properties.
With as little as $ 500, you can start building a real estate portfolio and reap the rewards.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.