In economic downturns everyone tends to tighten their budgets, and that includes retirees. In fact you may find you're actually saving in retirement after paying your regular expenses. So where should you put this 'extra' savings as a retiree?
You may tend to just put it into your retirement savings into a bank account. But that makes your money vulnerable to inflation and unable to participate in market upturns. Its earnings are also taxed yearly - you may as well put it under the mattress.
Better to make it work toward ensuring more for you in the future. At 65 you statistically have some 20 years of remaining life expectancy. Long before that time elapses, both inflation and economic upturns will affect your holdings.
Presuming that you've stashed anywhere from 1 to 2 years of easy-to-access emergency money, you should put your 'extra' retirement savings into investments of a longer time horizon. Here, you're looking for equity growth – both to offset the effects of inflation and further capitalize on the eventual rebound of the economy and the stock market.
Be sure to diversify your retirement savings among a variety of equity portfolios. Although you may invest some in funds that cater to large capitalization stocks, you should try to include real estate investments, international stocks, emerging markets, and smaller U.S. stocks.
These investments will reside in your 'taxable' accounts since they come from investment earnings and not work earnings. And as equity-based investments, their annual earnings should be small, since you're investing for 'growth in principal'. They may not 'move' for a while, but remember, you've already proven you don't need this money.
Consider this money outside your normal portfolio arranged according to your risk profile and income requirements. This way you can afford to risk a small portion of retirement savings and wait sufficient time for it to bloom.
For the most conservative investors, consider index-linked CDs. These are FDIC insured CDs that pay interest based on increases in the stock market. If the market falls, you original principal is guaranteed. If the market rises, your index-linked CD increases in value. Similar to this alternative, are equity-indexed annuities. The same principals hold. If the market declines, the issuing insurance company guarantees your principal. If the market advances, your annuity balance participates in the gain. Consult a retirement advisor to learn about your options for saving in retirement.
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This is good advice - diversification is just as important after retirement, especially as medicial technology advances and lifespans increase. I've heard some scientists mention that, given the current progress of medicine, a lifespan of 120 years or more is well within reach of those who are currently middle aged.
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Good post. I like to keep a fair amount in precious metals: gold and silver. The reason being that they will never completely loose value - gold or silver will always retain some value - even if the price crashes, unlike stocks.
Another reason I like gold & silver is that currently there is a lot money being pumped into the markets which will manifest itself in inflation in the future and they're a good hedge against inflation.
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Diversifying is always a plus factor when considering profit in a passive manner. For those who want to play safe and are still young, having their money entered into time deposits is enough to bring in a small fraction of income.
i agree, being safe and putting your money in a place that is slower growing but guaranteed is a good place at this point in time.
I think aaa municipal and corproate bonds would be another good idea. They give income and can go up in price since they are down since last year.
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Nowadays investing in gold seems like advice everyone gives. I would not advise someone to invest in holiday homes, especially not luxury homes abroad which for a long time have been overvalued because it sounds cheap. Do an investment like that and be prepared it will be hard to sell if you need to.
i join you in this case, in this days when world is passing from the biggest crisis being safe and putting your money in such a place that is slower growing but guaranteed is a good place at this point in time.
That's great advice. A retiree's worst enemy is inflation... But the silver lining in the latest economic downturn is that so many great assets are selling at low prices relative to their past worth. The right rental property can be a great investment in this climate. Rental income is offset by depreciation, and thus, is tax-free. So you beat inflation and taxes. Meanwhile, traditional blue-chips like Coca-Cola (KO) and PepsiCo (PEP) are trading at multi-year lows, offering solid dividends, no exposure to large debts, and great brand products which promise to beat inflation over the long-term.
Do what this post says... Don't put extra savings in a low-interest bank account!
I like anything that provides a income. Reits and trust and even bond funds. This way i can reinvest income and make more over time. I try to average over 5% return so it keeps up with finlation and will keep my principal while i take the income.
Diversifying your retirement assets is critical. I think right now is the best time to invest in real estate. With the vast amount of foreclosures out there, a person could easily make an investment that would double in value over the next 5 years.
In my opinion, the saving portfolio recommended was for someone building wealth to retire on. Someone who already has built up their retirement fund needs to worry about protecting it. A portfolio you have to live on should take less risk than a growth-oriented investment mix. This is due to your investing time horizon before/after retire.
What should that portfolio look like? I think, the beter balance.. It will have more fixed-income funds, both to generate income and to hold down volatility.
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I agree with the previous comment. Many people make take advantage of hard times and make money when the market is depressed - never more true than in real estate. Prices in real estate always climb back up. I saw this happen in Argentina, after the country went bankrupt.
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i agree, being safe and putting your money in a place that is slower growing but guaranteed is a good place at this point in time
As we transition from spenders to savers, this is excellent advice. I know this economic downturn has me changing my ways.
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Good post. 401k is one of my investment vehicle especially when your company matches your contribution. I am lucky that my company offers 75% match of how much I contribute. Always save first before you start spending!
My money isn't invested in stocks or fiat currency where the potential for hyperinflation in this current economic scenario could eat away profits. I'm in gold and silver bullion.
People have a short memory and most are very used spending everything they have. It will come to bite again and again. Thanks for your post!
Diversifying your investment portfolio is the most basic rule in investing. I stashed some cash on a high yield savings account which I can easily get in times of emergency. Opposed to some of investors' theory, I believe that the recession is also the best time to buy stocks. Share prices are low but the catch is to buy stock from good standing companies and from panic sellers. Gold and silver is a good option too.
I agree with you about having folks invest more of their money aggressively. It seems that most advisers tell their clients to be far more conservative than they need to be. Like you mention someone who is sixty five has a long life ahead of them if they remain healthy. Having a time line of twenty years certainly makes more sense to have a longer term growth investement strategy.
The right way to invest is to always do it as carefully as possible. Diversification is always smart if it is done cautiously. Investments are a valuable way to keep money working for to those who can afford to do it. Having a diverse investment portfolio can keep retirement secure and prosperous for many years.
Roth 401K is perhaps now the best retirement plan you can use. Even they tax you when you invest in, but it's tax free when you withdrawal during your retirement. I made a financial calculator before for a company to compare the overall earning with 401k vs Roth 401k. Roth 401K will give you more money at the end.
Thank you for your retirement investment advice. Diversifying is always a good idea when investing, especially while the market is still so uncertain. I also like idea of real estate investments which are usually a pretty safe bet even in this recession. Planning for a long life is a wise choice. People are living longer and healthier so outliving your money can be a devistating consequence of longevity.
I work for a company that specializes in helping people TAKE CONTROL of their retirement funds. By getting it out of the stock market or a former employers 401K and rolled over to an IRA. Then you can do SELF DIRECTED IRA INVESTING, and invest in Gold and Silver or other precious metals, Real Estate, Title Deeds, buying or investing in a business. Anyways I thought some of your readers might be interested in seeing some information about Alternative investments via a SELF DIRECTED IRA.
Thanks for the Great post!
Great advice. I am thinking about ditching my CDs for better returns. They are just not paying anything these days.
Great advice encouraging people to invest for growth and spread the money among a variety of equity portfolios.
One thing I've learned to do to make more cash available for investing is to use the IRS Withholding Calculator toward the end of the year to adjust withholding allowances on my W-4. By doing this I get less tax withheld toward the end of the year and can invest the money. How it works is you enter tax paid to date for the year, estimated itemized deductions etc. and the calculator tells you what to put in as allowances on your W-4 for your remaining paycheck(s) to minimize your refund or amount owed.
I blogged about this a while ago - Eliminate Your Tax Refund And Pocket The Savings.
I agree with Your Roth IRA that inflation is a retiree's enemy, or anyone for that matter. That's why investing in gold and silver is the key. Just recently, the National Inflation Association declared silver as the best investment of the next decade.
Saving is a very good practice not only for your retirement but also for other things. About being conservative, well, we really can't blame them can we?
I agree with diversifying your retirement money. It's a lot safer that way.
Thanks for the tips on where to get the highest yields and not risk losing everything in the process. Safety and High Yields are the name of the game. I was wondering if you had any specific equity annuities that you recommend for someone with these needs in mind. I am a NY divorce attorney and am relatively young. So any tips you can offer on this limited info would be greatly appreciated. Thanks!
Looks like you've covered all the important points. Investing for short and long term, as well as diversify your investments. It can be a balancing act and usually comes to down to personal preference. In the end, having a mix of aggressive and conservative investments is best.
Also, don't under estimate the value of investing in a small home business. Many retirees have small hobbies and time which can produce some passive income.
Investors are always make some mistakes that would lost their money or estate,but your advice is great and the way to diversify the retirement money is safe.
Nice info here.
Good for starter freelancer. My self, have my own formula about freelance money management. Sometime people choice to get retirement from jobs for some option, including start their own business, of course start as freelance first.
This tips great for starter freelance to understand how to manage their income, because start the business is not easy like you see at the first time.
yaa my thaought are also like you. i belive that the you should keep the retirement money in the place whre it is safe
After retirement it is a great concern to save your money. I think one should invest their money in profitable business rather than saving the money
This is probably the best solution, all the rest is less certain. Retirement is a very important thing in life and should be prepared for it the right way...
With the economy, it is best to consult with a professional consultant to find the best and most secure way to save your money for retirement.
i agree, investing your money where growth is slower but guaranteed is a wise decision in the current climate
Is it really wise to investment one's retirement benefits in real estate? We are in the economic downturn and people, as a matter of fact, are hesitant to place their hard-earned money in any investment, much more in real estate.
In the global financial conditions right now is the best time to invest in real estate. Through the increasing amount of closed purchases on the market, you could easily double your invested money in the next years.
Good post. That’s great advice. A retiree’s worst enemy is inflation.
Great advice. I am thinking about ditching my CDs for better returns. They are just not paying anything these days.
I agree with your way of thinking.We have to spent our money in a profitable business where you can get more by spenting less.Other than that there are some financial companies where we can save and double our money but we have to be very careful while saving our money to these companies.
A good thing to do before retirement is putting your money in different places. By dividing it, you are promoting more wealth. This could be in stocks, bank, or even a CD.
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retirement saving is very important so that in the future you will not get difficulties with your living. Thanks for sharing this useful information.
Be sure to diversify your retirement savings among a variety of equity portfolios.I agree. No matter you are young or may have been retired, it's the truth.
I agree with you about having folks invest more of their money aggressively.
After retirement it is a great concern to save your money. I think one should invest their money in profitable business rather than saving the money
Great advice encouraging people to invest for growth and spread the money among a variety of equity portfolios. Having a time line of twenty years certainly makes more sense to have a longer term growth investement strategy.
In Europe following years there will be a big problem about retirement, because we get our retirement income from our younger generation, if it goes like that, we don't have a chance to get retirement income.
It's best to save for your future but make sure to invest into something worth it like small farm where you can stay as soon as you retire or engage into small business where your earnings will directly go to your retirement savings, or simply open a bank account that you can only access after retirement. But regardless of the preparation, make sure that you are prepared, not only financially, but also emotionally and that's what others tend to forget.
Roth 401K is perhaps now the best retirement plan you can use. Even they tax you when you invest in, but it’s tax free when you withdrawal during your retirement. I made a financial calculator before for a company to compare the overall earning with 401k vs Roth 401k. Roth 401K will give you more money at the end.
We have seen the price of oil go from $30 to $140,alternate energy stocks are the next big investments .So here you can safely diversify your retirement savings as we are soon to turn into a energy-hungry nation!!
While its true that investing your retirement can benefit in the long run, we must diversify our investments to make sure it is safe & our future income is guaranteed.
TBH I lost faith in saving for my retirement a long time ago. I had put a load of money into a private pension (a directors pension) then saw its value nose dive. I've since sunk my money into property. I'm hoping my other house will provide me with a fairly steady income when I retire (from rent).
Cheers,
Bob.
Retirement savings is really very important for your future use. We must really diversify our retirement savings among a variety of equity portfolios. This article is very informative.
In the UK savers should make use of their ISA allowance each year. As this article suggests, you should always diversify. ISAs shield your cash and investments from tax, and the earlier you start the bigger your tax free pot will become. Many people in retirement rely on these savings - but can only do so as they planned their finances properly.
This info will be a lot useful when taking into account the age of the investor. When a person is younger he should allocate a higher portion of his retirement funds into stocks and other more risky investments, but those which might bring that extra yield. On the other hand, at a later age, stock investment should be moderated, making sure that the available funds will not drop like a rock just before retiring....
Retirement will be enjoyed if your savings are put on worthy things that will still help you grow even you're getting older. Something that will make you busy like having a small business on your own.
well preparation is needed before you retire.
good article, thanks.
John Doe, yes right....better slower but guaranteed than faster but high risk. my opinion gold is the best investment for this situation.
There are some good strategies for diversification. Does anyone have advice on the dos and don'ts of hiring an investment firm or accountant to handle the manage the investments?
Great article. We all need to prepare before we retire.
Really great post, full of valuable information. Diversification of retirement saving is really important especially with inflation and economic crisis. Goal should be to reinvest your income smartly to make it grow and earn more with your investment.
While many people are having a hard time trying to save money for retirement, I am one of the lucky people who's place of employment offers up to a 5% match on any contributions I make in my 401k.
This is great for me as the money is taken out of my check before I ever get it, so it makes saving a whole lot easier.
A great article that can help people retire with piece of mind. One additional thing to consider when investing is using passive investing. Good luck everyone.
Great article. Retirement saving is extremely important now more than ever.
The best advice from this article for me is "diversify your retirement savings among a variety of equity portfolios" we saw pertty bad examples ended up foreclosures espacially in that retirement age, most people could not choose the retirement because they do not have enough money to rely on, we have to secure our money for retirement for sure. Thanks for sharing.
Yes, the money what we get at the time of retirement is the last money earned by us. It should be utilized properly and it has to be invested after making sure that we will get good returns out of it.
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Saving in retirement, now this would be wonderful achievement and a dream, I might add, for most retirees savings is near impossible, unless very good guidance was achieved pre retirement.
In my opinion retirement is not only about making sure you can pay for a (hopefully) comfortable lifestyle after you stop working. I strongly believe retirement is also about finding stuff to do that gives a sense of fulfillment.
Although my retirement is probably a long way to go, I am already looking for ways to combine some extra income with interesting activities. The Adsense program from Google in my opinion is a way to accomplish this. Many pensioners have loads of expertise they could monetize by blogging about it. That way they can make extra money and stay active in their own field of expertise at the same time. I already started at . It's just a start, I know. But I think programs like Google Adsense can contribute in a positve way to retirement.
Your retirement is very important and I feel that you need to take your time in deciding when and where to invest your money and save at least 10% if you can out of each pay check and put it up in a savings account.
Nice post, your retirement is very important and it would decide some of your future aspects so it should be taken after lot of understandings.