The best time to prepare for retirement is to set aside funds ahead of time. As one ages and begins to quit professional work-life, the next thought will be how to generate funds to keep the family and other activities going.
In this article, we show the best investment strategies for retirement.
Why You Need to Plan for Retirement
You need to plan for your retirement while you are still actively engaged in work. Whether you work for someone or have a private business; setting your funds aside for the time you wouldn’t be working is important.
These are some of the reasons why you need to prepare for retirement:
- The life expectancy, depending on your location and way of life can be up to 30 or 40 years, depending on when you retire. How do you plan to keep your life and other related activities running if you don’t have a source of passive income?
- With good retirement planning, you will be able to have some funds to keep your daily expenses running, while setting aside some funds to take care of your family when you are no more.
- The retirement fund also helps you to keep a “cap” on which how much you spend, knowing that you no longer actively work for money.
The Best Investment Plan for Retirement
As you see retirement at the end of the tunnel, here are some of the income streams that will keep you “running” after an active lifetime of working and saving.
1. Annuities
Also called retirement annuities or income annuities, this is the type of income stream ideal for retirees who are not willing to risk it all.
An annuity is a contractual agreement between you (the retiree) and an insurance company, mandating the company to accept a sum of money (either as a lump sum or monthly payments), and in turn, make regular payments to you.
The benefits of having an annuity include:
- Getting guaranteed income for life.
- Helping you maintain your budget.
- With an annuity, you will also have an interest-free income.
- You’ll be able to start “earning” almost immediately, especially if you opted for immediate annuities, which start paying within a month of purchase.
2. Invest in Bonds
Bonds can save you and provide an umbrella on “rainy days.” Most retirees opt for it, because of the less volatility, the predictability of the income, and the less competition.
Moreover, you can diversify your investments with bonds. For example, you can invest in bonds originating from the overseas market, government-issued bonds, and municipal bonds. Others are mortgage-backed securities, bonds from the U.S. Treasury securities, and debt instruments from corporations.
3. Invest in Dividend-Paying Stocks
The stocks with dividends attached can provide a veritable source of income for you. It is also one of the safest investments for retirement, because of the tying to a stock issued by a real-world company.
The dividend-paying stock will also help you earn both ways – from the rise in the price of the stock in the market and the profit shared by the issuing company. There are basic rules you must follow have a successful dividend investing.
4. Rely on Your Pension
This works best if you worked for the government or a company that pays its workers after they retire. So, find out if your current job has a plan in place for ex-workers to receive a pension. If so, you can be sure of getting some money to keep you going.
A major benefit of getting a government or company pension is that it extends to your family when you are no more.
On the flip side, you may not start receiving the pension immediately after you retire.
5. Reverse Mortgage Comes to the Rescue
When your income streams have all “dried up” and you’ve no other options left – it might just be a good idea to use your property to keep going. A reverse mortgage can be beneficial, as the income is tied to your house.
Here are some quick points to note:
- A reverse mortgage requires turning the equity in your home into cash. This way, you will borrow against your home, provided you have enough equity or ownership in it.
- This retirement income stream is usually ideal for people above the age of 62.
- The income or cash earned from this is not always subject to tax.
6. Social Security Could Help
Although this wasn’t the earlier intention, Social Security can be a lifesaver for retirees. This is because, by the time you retire, you must have made considerable contributions to the program.
One way that Social Security can fund your retirement days is by making inflation-adjusted payments.
To be on a better receiving end, you should start your contributions on time so by the time you retire; you must have made more payments – and lesser ones at that.
7. Start Keeping a Savings Account
As you near retirement age, it is worth it to open a savings account. This is where you set aside specific amounts of money for as long as possible.
By the time you retire, the amount must have been considerable; leaving you with enough money to fund your living expenses.
8. Own a Rental Property
Real estate investment remains one of the most reliable because people tend to move around and so does business opportunities spring up where people migrate.
Buying a rental property before retirement gives you a viable opportunity to keep earning as a retiree.
You could lease it or turn it into a short-let apartment.
Also Read:
- 7 Basic Tips on How to Manage the Finances of Your Small Business
- Where to Obtain a Business Loan to Fund Your Franchise Startup
- What Are the 5 Key Factors to Consider When Choosing a Hedge Fund to Invest in?
Conclusion
Life after work can be exhausting – and all you want to do is rest after many years of working for money. But all your financial worries wouldn’t be over if you didn’t plan for this day. That is why you need to know how to invest strategically. The ideas in this article will get you started.
If you are looking for more best retirement income streams, we would recommend starting a side business and employing people to run it for you or investing in a Certificate of Deposit (CD).
