Saving money for a comfortable retirement is perhaps the biggest reason why people invest in retirement plans. It is important to find the right balance between investment returns and risks. Here are some helpful suggestions that can ensure decent returns on your retirement savings:
- A versatile return portfolio A common way to create a retirement income is to construct a portfolio of stocks and bond index funds. A return portfolio should be designed to achieve a respectable long-term rate of return. Along the way, you are required to set the withdrawal rate rules which typically allow you to take out 4-7% a year considering the increase in the inflation. A versatile return approach also uses the concept of “total return” which targets an annual return of 10- 20 years’ worth of investment and should meet or exceed your withdrawal rate. At the same time, it is also important to have a diversified investment portfolio with a systematic withdrawal plan.
- Use retirement income funds Since retirement income funds are a specialized type of mutual funds, they are automatically allocated across a diversified portfolio. The investments should be managed with the intention of producing monthly income during the retirement period. Some funds have an objective of producing a higher monthly income and as a result, might attract a higher initial principal rate.
- Invest in immediate annuities These could be in the form of insurances rather than investment. Annuities should be included to produce decent return rates during the retirement years in exchange of lump sum payment before retirement. The investor can choose from fixed annuities and variable immediate annuities based on the rate of inflation. However, it means receiving a lower monthly amount. Immediate annuities can be a good solution for people who don’t have any other sources of guaranteed income during their retirement.
- Invest in bonds Buying a bond means loaning money to the government, a corporation or even a municipality. In return, the borrower agrees to pay the loaner an interest for the set amount of time before the bond matures. The investor gets the principal amount upon the maturity of the bond. The yield or the interest acts as the steady income during the retirement period. There are short-term, mid-term, and long-term bonds. So, it depends on the investor when they wish to put their savings in bonds. Another advantage of investing bonds is their floating interest rates, which allows the investor to purchase them in the form of packages.
- Retirement and real estate Renting out properties can provide a stable source of income. But there are different maintenance requirements when a person has their own real estate. It is important to calculate potential expenses such as vacancy and rental rates of the area. Though Investing in property is not a get-quick-rich business, it can be a great retirement investment for people who have sufficient funds for the same.
Remember, it makes the most sense to choose retirement investment as a part of an overall investment plan. They can help one get good returns if chosen to be clubbed with other investment options.
