After 30 years or so of hard work comes a time when you just need to relax and enjoy some quality time with your loved ones. Being a retiree can indeed be scary, especially considering the economic fluctuations we witness every day. However, with some careful planning, you will reap the rewards of your effort and ensure that you live the rest of your years comfortably.
Whether you are considerably young and still preparing for your golden years or have already retired, you must know how to properly invest your savings, and this is what this article is all about. If you are interested in learning how you can diversify your retirement portfolio, just keep on reading.
Consider How Much Time you Have
This tip is geared more towards those who are still trying to build their retirement fund. Your age greatly factors in the type of investments you should focus on. For instance, younger individuals can easily get away with riskier portfolio options like stocks. On the other hand, employees in their 50s should focus more on markedly safe investments that guarantee a steady flow of income when they retire. These include municipal bonds and CDs (certificates of deposit). You must also keep track of inflation; what might be considered a decent monthly income now will not necessarily be enough in a few years. So, make sure that your investments will provide more money than what you currently earn.
Get a 401(k) Account
This is a no brainer, but you’d be surprised how many people forgo this amazing retirement plan. Having an employer who offers 401(k) plans is regarded as an advantage, and for good reason. In a nutshell, a 401(k) plan functions as a saving account to which you can make monthly contributions from your salary. The great thing about this arrangement is that some employers offer to match up to 50% of their workers’ contributions. For example, if your employer offers this perk and you contribute $100 to your account, they will add an extra $50. In case you hit 50 and have not been adding enough funds to your 401(k), count yourself lucky because you can take advantage of catch-up contributions. This benefit allows you to make contributions that surpass the usual annual limit of 401(k) accounts, helping you accumulate more profits in a shorter span.
Open an IRA
An IRA, or an individual retirement account, is a superb investment option for workers whose employers do not offer 401(k) plans. Even if you have a 401(k) account, you can still make use of an IRA to increase your income after retirement. Generally speaking, there are two types of IRAs: Roth IRA and traditional IRA. While Roth IRAs’ contributions consist of after-tax money, traditional IRAs’ are tax-deferred, meaning that the money you save in your account is not taxable until you start withdrawing it after retirement. Since the individual retirement accounts most financial institutions offer have limitations regarding the kind of investments you can make, the financial experts from TheEntrustGroup.com recommend that you look into opening a self-directed IRA (SDIRA). A self-directed IRA allows you to invest in various assets, including real estate, commodities, and precious metals, which makes it the best option. However, you will have to find a reputable SDIRA custodian if you plan on selecting this type of individual retirement accounts.
Buy an Immediate Fixed Annuity
The above tips are more suited for those who are approaching retirement, but what if you are already a retiree? For most retirees, an immediate fixed annuity is usually the answer. As opposed to traditional annuities, you do not have to make contributions for several years to start cashing in on your investment. The way an immediate annuity works is that you pay an insurer a lump sum and specify for how many years you want to receive monthly payments.
Most retirees choose to get payments for the rest of their lives while a few believe that 10 years is more than enough. There is also another variety of immediate annuities that has variable rates if you are worried about inflation. Nevertheless, if you want a safe investment, we recommend that you go for the fixed-rate type.
Retirement should be a relaxing phase of your life where you do not have to worry about a thing. By being financially savvy, you can enjoy your golden years in peace. If you do not know how to invest your retirement savings, 401(k) plans, IRAs, and immediate annuities are all viable options. Just make sure to consider market volatility before making any decision to find the safest and most lucrative investment.