If you would like to enjoy a tension-free retirement you must be ready to learn some investment ideas that will make you rich.
Retirement would have been more fun if one didn’t have to live an extra 20 to 30 years without guaranteed income. These days, with the average life expectancy being 76 years, most people live into their eighties, and some into their nineties.
With that, the once celebrated retirement becomes dreaded as people worry about how they can survive their golden years with just funds from social security and pensions. It’s even more worrisome when one recalls that social security benefits replace only about 40% of their pre-retirement income and that most US companies no longer pay pensions.
This brings us to discussing seven investment ideas that could guarantee a tension-free retirement. You can be assured of a stress-free retirement if you make the right financial plans.
7 Investment Ideas for a Tension-free Retirement
These investment ideas could be all you need to retire rich:
1. Invest in Growth Stocks
Most people shy away from stock investing because of the high risk involved. But what they do not know is that with high risks come great rewards.
Stock investing might not be ideal for someone who is nearing retirement, as what they crave at that time is capital preservation, not growth. However, if you’re a young investor who is still in his or her twenties or thirties, investing in growth stocks can be all you need to retire rich.
This will be possible when you carefully select well-performing stocks with great potential for future growth. Though stocks are risky investments, there are companies whose stocks continue to rise even in market downturns. This could be because of their products’ performance in the market or just management expertise.
A good management team invests heavily in company growth by diversifying production or service, investing in technology, and ensuring great human capital development. This is seen in the company’s continuous growth on the stock market. These are the stocks you should have in your portfolio.
2. Invest in Dividend-paying Stocks
Unlike growth stocks, which are focused on increasing their share price, dividend stocks emphasize regular dividend payments to investors. Most companies do not pay dividends until they’ve achieved a certain level of growth. That way, they’d continue to pay dividends regardless of market fluctuations.
Investing in dividend-paying stocks will guarantee you a steady flow of income for a long period of time. To further enhance your earning potential in retirement, you can reinvest the earnings into the company or in another type of investment. The good thing is that, when you deem fit, you can sell the shares to recoup your capital.
Should you invest in every dividend-paying stock you come across? Absolutely not. Some businesses entice investors with unsustainable margins, only to see their investments plummet. That’s why you should look out for companies that have attained “dividend aristocracy” when investing for retirement.
3. Purchase Annuities
Investing in annuities is one of the best investment ideas for a tension-free retirement. Annuities guarantee you a fixed monthly or annual income for five to thirty years, or even for the rest of your life.
Depending on how long you have until retirement, you can choose to purchase deferred or immediate annuities. Deferred annuities do not provide income until a later date. This is great if you’re a young worker who has at least 30 years before retirement.
But, with immediate annuities, your income starts coming as soon as the next month. This form of annuity is best for old investors who are nearing retirement and have a lump sum they’re scared of exhausting before they die. For instance, you can deposit $500,000 with an insurance company and have them pay you $2,000 monthly for the next 30 years.
4. Invest in Rental Properties
Rental properties are great investment ideas for those who are nearing retirement. The average lifespan of a new house in the US is 70 to 100 years. That means if you erect a rental property during your working years, you’re guaranteed to receive rent until your death. However, rental properties come with maintenance, vacancy, and other unexpected costs. You should factor all these in before deciding on how to invest in properties.
The trick, however, is to have as many rental properties as possible. This would ensure you have enough money to manage the properties while maintaining your lifestyle in retirement.
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5. Build a Strong Bond Ladder
Bonds do not measure up with stocks in terms of returns, but they offer more safety to your capital. Most experienced investors never fail to have a couple of bonds (especially government bonds) in their portfolio.
A bond is a loan to a company (corporate bonds) or government (government bonds). When you purchase bonds, the borrower pays you interest until the maturity date and eventually pays back the capital. However, you should make sure to only invest in bonds with high quality ratings, as bonds with lower quality ratings tend to have a significant amount of risk.
You can use “bond laddering,” which is an investment strategy that involves assembling bonds with different maturity dates, to build a sustained retirement income. With this strategy, you can make sure you have guaranteed income every month for a couple of years.
6. Consider Real Estate Investment Trusts
If you don’t want to actively invest in real estate, investing in real estate investment trusts (REITs) can be a great passive way of doing so. REITs are corporations that use investors’ funds to purchase and manage income-generating real estate. They manage the properties, collect rent, and share the income among the investors.
REITs are total return investments for everyone who dreams of a tension-free retirement. They guarantee high dividends and capital appreciation over time. This is mainly because of the high level of competition in the real estate market and the consistent rise in the value of rental properties.
Over time, REITs have been known to produce solid returns. This makes them perfect investment options for a jolly good retirement. There are publicly traded and non-traded REITs. While you can purchase and trade the former on public markets, the latter requires you to invest through a professional broker. Both options, however, have the potential to pay you handsomely through retirement.
7. Retirement Income Funds are Essential
Having professionals manage your money in retirement income funds (RIFs) is a great way to guarantee a tension-free retirement. RIFs are forms of mutual funds where your retirement savings are used to invest in large and mid-cap stocks and bonds. They’re well diversified and tend to produce more stable yields over time.
Like with mutual funds, you don’t have to actively participate in the management of your RIF investment. You only need to provide a minimum amount of capital, and your manager takes it from there. This is perfect for young investors who are keen on watching their retirement savings grow. In fact, investing in RIFs is seen as one of the best investment ideas for young adults who crave a tension-free retirement.
Conclusion on Investment Ideas for a Tension-free Retirement
There’s a lot to do in retirement, but worrying about money shouldn’t be one of them. You can avoid this problem by ensuring your retirement savings are put to good use from the very beginning. With lots of investment ideas littered all over the internet, it’s always advisable that you do your due diligence before embarking on your investment journey.
Hopefully, this article has given you some insight into the best investment ideas for those seeking a stress-free retirement. Use the information provided here wisely, and you’ll understand what it means to retire rich.
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