Safe Investments for Retirement

Retirement is a period where people hope to live a stress free life without having to worry about their income or running out of their savings. However, the reality is far from what many retirees hope, and safe investments during retirement are the key to living a stress free life in a hugely fluctuating market economy where savings per se would not guarantee an adequate income. Therefore, this article will discuss some of the ‘safe’ investments for retirement. One should discuss these suggestions with a professional, or else study the same in advance before committing to any one or multiple investment options described herein.

The usually safe retirement investments

According to experts, one the safest methods of investment for retirees are the investment made on treasury bills and perhaps on FDIC-Insured savings accounts and CDs. However, in the recent financial turmoil, these options were not yielding much in order to consider them as worthwhile investments that would bring a reasonable income or a growth in their existing funds for the retiree.

The risk of relying on so-called ‘safe’ retirement investments

When considering a person who retires at the age of 55, he or she should make use of the savings made during his or her working life to sustain at least another 30 to 40 years. However, when someone calculates the expenses and the withdrawals that should be made to fulfill such expenses during retirement, unless the person had earned enough savings during his or her working life, it would appear that the savings might not last until such time the person is expected to live. At the same time, unexpected expenses and the lack of yield from the existing savings would also make it difficult to maintain the savings to replenish the goals that are being set for retirement.

The ‘safe’ route towards aggressive retirement investments

In this regard, expert suggest being somewhat aggressive at least in the early retirement as the yield of such investments may allow transfer of funds from high risk investment options to relatively low risk or safe investments.

Bonds against ‘bond funds’

Investing in bonds is a suggested method for retirees as it seems to yield more when compared with bond funds. Although bond funds had been a better option earlier, a potential rise in the interest rates in the coming decade may cause the bond funds to yield a low return. However, experts predict individual bonds to be more profitable as it will yield its maturity value as well as the guaranteed interest more predictably than bond funds.

Diversified portfolio in stocks

Investing in stocks is another option that should be considered at least in the early parts of the retirement. High yielding stocks are often a good option to include in the investment portfolio of a retiree, although experts caution about going after yield as such stocks are usually unpredictable. Investing in index funds, or shifting investments to index funds are a better option, however it may not yield much in a short period. Instead, such index stocks would add value as the economy picks up as the investments made in such stocks imply that the economy would grow gradually in the coming years. Some experts believe that a person entering retirement should have around 50 percent of his or her savings as stocks and the rest as bonds while as years pass by, the percentage investment in stocks can be reduced to around 25 percent. However, a more conservative investment would reduce the short-term risk. Although it may also halt the growth of the investment and the purchasing power via rising inflation.

In order to invest money more aggressively and not having to worry about the savings, it is best to opt for an annuity at the very beginning. Such a guarantee would not gain much, although it will ensure the retiree receives a check at the end of each month.

All in all, there are several different investment options a retiree can take with regard to his or her retirement savings. Seeking the advice of a professional is highly recommended as having to feel stressed about investment decisions hampers the freedom expected by a retiree.