Investing for retirement is a lifelong project that may go through many twists and turns over the course of your career. Throughout the time that you’re putting together your portfolio, the decision-making process in choosing the right investments can get complex. Will the choices you’re making result in a retirement fund that covers you and your family for all your anticipated expenses? Or could a choice lead you to delay retirement to save up just a little more? While there’s always a chance that events might not go the way you envision, there are things that you can do to make safe and smart investments as a retiree.
Balancing Security and Opportunity
The most important part of investing for retirement is having the patience to choose stable investments. While an innovative product or new market opportunity could result in tremendous gains, the odds of failure can be too high to consider them the keystones of a retirement investment strategy. Instead, retirees can benefit from focusing on safer, more concrete investments.
These investments can take many forms, some of which naturally enter into many asset mixtures over a decades-long career. Further, some of them depend on opportunities that are available at work. Nevertheless, out of the following six investment opportunities, nearly everyone will have access to several of them to make a solid foundation for retirement. Ultimately, whatever composition you decide for your retirement portfolio, it’s essential to balance genuine security with those opportunities that may help your wealth blossom.
6 Safe and Smart Investments for Your Retirement
Depending on where you are in your career and what business opportunities you’ve already come across, you may have access to several of these investments. Many people might choose to supplement these more secure investments with some riskier ones to increase their portfolios’ opportunity for growth without exposing themselves to too much risk, but virtually everyone with an effective retirement strategy can lean on some of the following.
Work Pension Plans
Less common today than in the past, pension plans represent one of the best ways that you can invest in your future. Your time spent working will result in continual funding during retirement in the form of regular pension payments. If you can work for an employer with one of these plans, its value should be secure as long as the company continues to exist.
Government Bonds
Unlike market assets, U.S. government bonds are backed by the full credit of the United States of America. These bonds are guaranteed to retain their face value along with any interest-based increases during the time that they’re held. Due to this guarantee, there’s not a great opportunity for them to increase extensively in value, but they have a stable floor that prevents them from losing value completely, barring the most extreme economic developments.
Real Estate
Real estate investment for many people begins with purchasing their own home. Despite the added financial responsibilities, home ownership allows you to invest in an asset during your career that gives you lifestyle freedom while building equity. Over time, real estate markets tend to increase in overall value, as reported by the St. Louis Federal Reserve Branch, though local market conditions can have a significant impact on this. Like nearly any other asset, real estate is not a guarantee, but it’s among the more secure for building equity and even generational wealth.
Stable Commodities
Stable commodities such as gold and silver represent investments that are likely to at least hedge against inflation. As the value of money changes over time, the relatively static supplies of gold and silver mean that they’ll continue to retain their relative value and may even increase by the time you retire. According to Macro Trends, the price of gold in 1970 was around $35, while it is now worth around $1,900 per ounce. Accounting for inflation using data from the Bureau of Labor Statistics, that’s an increase in value of about six times in just over 50 years, which is a modest but stable investment.
Mixed Asset Accounts
Individual stocks on the market are often highly volatile, even if they’re associated with companies that have been in operation for decades. A bit of bad news can cause an individual stock to crash, so investments in the market can be associated with the philosophy of not putting your eggs in a single basket. It can be time-intensive to manage numerous trades throughout the weeks and months in any given year. It’s often easier to rely on managed accounts that operate with mixed assets to earn some returns over the rate of inflation.
Retirement Accounts
Accounts such as the 401(k) and various styles of IRA are synonymous with retirement savings. The programs are designed to help Americans prepare for retirement on their own terms by unlocking extra support from their employers. Depending on where you’ve worked, you may have had access to matching programs, which is a guaranteed 100% return on your initial investment up to a certain value. Even if your workplace doesn’t offer these programs, retirement accounts are still excellent ways to reduce your exposure to taxes during retirement, meaning your money can go further with less regard to market performance over time.
Resource Links
“CPI Calculator” via the Bureau of Labor Statistics
“Gold Prices – 100 Year Historical Chart” via Macro Trends
“Average Sales Price of Houses Sold in the United States” via St. Louis Fed