Preparing and investing for retirement is more difficult than ever. Where once individuals relied on pensions mixed with Social Security benefits from their companies in order to retire, now people have to rely on what they can simply save and invest prior to retirement age in order to try and stay retired. This can be exceptionally difficult for many because there often seems like no way to get ahead of the cost-of-living rises and be able to save enough to afford retirement. Unfortunately, it doesn’t look like anything will be changing soon, so knowing how to work with the resources available to you is key in being able to create a nest egg that is functional during your retirement years. Many of the resources currently available are low-yield investments. Understanding what they are and how they work is key when investing for retirement.
Along with understanding your investment options, you need to make sure to use retirement investment strategies that will provide strength to your retirement portfolio in the long run. If you get nothing else out of this blog, keep this one thing in mind: Diversification is the key to success. This is critical to keep in mind in order to help see continued growth. You want to be able to benefit from products that are tied to the stock market and Fed policy, but you don’t want them all to take a hit at the same time if rates drop. Keeping a diverse portfolio is a critical retirement investment strategy in order to keep growing your nest egg in a common-sense manner.
Of the many different types of investments, there are four particular categories of low-yield retirement investments that can really add up when built into your retirement portfolio. These are:
- Annuity Options
- Bond Options
- Real Estate Options
- Equity Options
Each of these different low-yield options have specific types of investments associated with them that can help to create an entire retirement investment portfolio that can provide positive growth. Keep reading to learn about how each of these options can function in your retirement portfolio.
Here at Income for Life, we focus on how annuities can help build your retirement portfolio and which ones are best for the stage of life that you are in. While you will hear about many different annuity types, these types all fall into the two following annuity categories that we will discuss. If you have questions about annuities and creating a retirement portfolio plan, contact Income for Life for a free consultation.
Deferred Income Annuities
Deferred income annuities are when you invest in an annuity contract with an insurance agency in order to receive consistent set payments from the policy at a later date. Deferred annuities have to be set up to start payments at least two years in the future versus an immediate annuity. These annuities can supplement your Social Security check, and depending on the specific annuity, can help by keeping up with cost-of-living increases that a simple savings account cannot do. One of the greatest pros for choosing annuities for your retirement portfolio is that they are the only investment that can guarantee lifetime payments. Additionally, there are many riders that you can add to a deferred income annuity, like a death benefit, and you will never lose the minimum value that you put into the annuity, even if you choose higher-risk annuities that are linked to the stock market index.
Immediate Income Annuities
Immediate income annuities are best for individuals who are already in retirement and need a way to guarantee monthly income for the rest of their life. The payment for an immediate income annuity is made as a lump sum and the payments back start right away. These annuities tend to cost more but older individuals can see higher payout rates as well. The one downside to an immediate income annuity that you must be aware of is that once you purchase it, there is no going back, so make sure you have enough money set aside for any potential emergency. Read more on our website about who is a best fit for immediate annuities.
Equity is money you can receive based on the value, or perceived value, of something. In this case, we’re talking about stock market investments. There are two types of stocks you can place your money in on the stock market: dividend and non-dividend stocks in order to gain further money based on the value of the stocks you have invested in.
High Dividend Stocks
High dividend stocks are when you choose to place your principal on specific stocks in the stock market. You then receive yields of roughly 2 to 3 percent on the money, on top of what you gain (or lose) from stock market fluctuations. These dividends are typically paid quarterly to shareholders and can provide increased income with a bit lower risk than simply choosing non-dividend stocks.
You often hear stocks and bonds go hand in hand, but they are two incredibly different kinds of investments. The simplest way to think about a bond is to think about it like an IOU to a company, the government, or other entity. You provide money to them and they will repay the money to you with interest. Bonds are often considered a less risky investment than other investment options, but they also tend to have a lower return. Even high-yield bonds tend to max out at just over three percent. While it is good to diversify and there are a variety of bonds available, you just have to understand where they fit into your retirement plan, if at all.
When you talk about investments, it’s hard to not talk about real estate. With the recent upswing in the real estate market, investment properties and other real estate investment options have been providing a lot of equity and income for those who have chosen this route. There are two main types of investments in real estate that are worth considering as a part of your retirement investment strategy.
REIT stands for a real estate investment trust. This is when you buy into a trust, one that allows you to get returns but without the hassle of owning property. This money is used to pay for the real estate projects, but it allows you returns on a full portfolio of real estate investments as the properties prosper. There are many different ways in which REITs can be established and bought into based on your investment needs.
The last option that falls under a low-yield investment that you can choose in order to diversify your portfolio is to invest in rental properties. If you know the local real estate market and are able to reduce payments on the property, then you have a shot at a really great investment in terms of continued cash flow. There are many different factors that influence the effectiveness of having rental properties, so you have to decide if this is a good move for you.
Income for Life is a retirement planning company that is here to help you not only retire, but stay retired. Let us help you evaluate your retirement plan and figure out what is the best way in which to prepare for your retirement years. Contact us today for a free consultation with a qualified retirement professional.