Your nest egg is worth defending
Finally, after all those years of labour and thrift, retirement time has come. Now, though, your income ceases, and you must subsist on your investments and savings to meet the bills. That makes every expenditure decision more important than it ever was before.
“You made it to the top of the mountain, and now you’re trying to make your way down safely,” says retirement planner John Gillet from Florida. “Why disregard caution now?”
You can’t waste time holding your breath in retirement after a big loss. Ron Tallou, a financial planner from Michigan, asserts that a single or two unfavourable years can completely deplete your savings. And yet, short of that, you need some growth, or you’re sliding behind the inflation curve — not just money sitting idle.
A good retirement plan will also give you a secure income and put your money in your hands. You will be needing it for your bills or wasteful expenditure like your medical bills or your home’s repair.
The experts recommend diversification — investing in lots of various types of investments — as a way to cut risk. You’ll also need to cut taxes and fees so you can keep more of your earnings.
Some lower-risk investments are:
- High-dividend blue-chip stocks
- Mutual funds or ETFs
- Bonds of investment grade
- Certificates of deposit (CDs)
- Money market funds
They can give you regular income, be very liquid, and spare you from excessive risk.
Don’t chase shiny promises
Even smart retirees can get caught up in high-sounding risk or “new” concepts. “People have shiny ball syndrome,” Gillet says. “They run after what’s in the headlines.”
Since they have more time off, retirees can watch more TV shows about money or hear advertisements for complicated investment vehicles with high returns. But the commercials are not always elegant — and occasionally are aimed directly at retirees.
Americans 60 and above lost more than $3.4 billion to investment scams in 2023, according to the FBI. Suspect anyone — even a friend — who promises a “can’t-miss” investment.
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Riskier investments to steer clear of
The following are investments that retirees should be on the lookout for or totally avoid:
1. Real estate development
House flipping or rental home purchasing can be glamorous but is very costly in something difficult to quickly resell. Repairs and maintenance, and even tenant management, are full-time jobs. If you still want exposure to real estate, do a REIT (Real Estate Investment Trust) instead.
2. Individual stocks
It is dangerous to put your money in the stock of one firm. If the company does badly, your retirement fund directly suffers. Specialists recommend buying mutual funds or ETFs, which diversify risk among hundreds of firms.
3. High-fee mutual funds or annuities
Watch out for mutual funds with over 1% per year in fees or annuities with complex language and back-end fees. These fees will quietly drain your return.
4. Alternative investments
Private equity, hedge funds, and venture capital may be high-falutin’ but carry high minimums and lock up your money for years. They have high fees and aren’t right for retirees who need to be able to access their money.
5. Physical gold and crypto
Cryptocurrencies and gold bars are attractive but will never pay you back and can be hugely unpredictable in value. “If you’re not technical, crypto is confusing and dangerous,” warns financial planner Teresa Bailey.
6. Day trading or friend’s business ideas
Attempting to time the market or investing in your friend’s new restaurant business will see you losing money hand over fist. Day traders lose, and small business enterprises will belly-up within a few years.
Keep It Simple and Safe
Retirement investing is not rocket science. Stay with what makes you steady money, keeps your cash easily accessible, and takes as much risk off the table as possible.
If you’re not sure an investment will be a good thing, talk to a good money planner first. And remember — slow, steady returns are smarter than taking it all and hoping for a shot at something big.
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In retirement, preserving what you already have is the smartest investment.
Let’s insert a quote from a money expert to make it sound like a newspaper column (e.g., Kiplinger or USA Today style)?
