Some Things to Consider…
It is tempting to think of retirement as the end of a road or a final destination, but in fact this mindset can put a spoke in your financial plans and sabotage you before you even get started. It is much better to think of retirement as just another phase in the journey of life, because your retirement funds may need to last another twenty or even thirty years, depending of course on how long you live after you leave full-time employment.
When retirement is around the corner, it may seem like all of a sudden issues that used to be a distant concern come out of the woodwork and things can get pretty scary. Luckily, there is no need to cringe at the thought of your impending retirement, even if you feel you haven’t saved enough or you are not confident your assets will last throughout your golden years. The following are some of the top retirement investments you can devote your funds to even if you are close to saying goodbye to your working life, and more importantly, to a steady stream of income.
Take Some Money Out of Stocks and Buy Bonds
When you are close to retirement you must tweak your investment approach in order to stay afloat. You are going to need to start making withdrawals on your investment accounts to replace the income that used to come from your salary, but this does not mean you need to abandon your long-term perspective on your entire portfolio. Even retirees need to have a percentage of their assets devoted to longer-term, more volatile assets like stocks. However, it is absolutely necessary to take a long hard look at your stock holdings and then sell some shares in order to free up funds for diversify into more liquid forms of investment accounts.
You don’t want to be forced to have to sell your shares in a down market because you need to have access to liquid cash. It is much better to take a relaxed approach to reallocating your funds and select those shares you want to sell off on your own time. Don’t forget you also have to factor in commission fees for the sale of the shares so there are costs associated with converting your equity holdings into cash. This means it is even more important to take a cautious approach to choosing which stocks you want to hold on to and which you would be willing to sell.
When you have sold off your shares, you can then take a portion of the proceeds and place it into a more stable investment such as a bond fund. This type of investment pays a fixed rate of interest over a predetermined time period and some can be structured to mature so it coincides with the time you may need cash flow. Some retirees have a series of smaller bond accounts that mature in phases so they never have to pay a penalty for ‘breaking’ the investment before its maturity date.
Buy an Immediate Annuity
One of the best retirement investments is an immediate annuity. This product is a type of insurance that converts a lumpsum of money into a series of smaller monthly payments over an agreed term, usually until the annuitant or owner of the policy passes away. You can liquidate part of your stock portfolio for this purpose or you can use funds from some other aspect of your portfolio, but the idea is to divert money from more volatile products or investments that are not as liquid so you can have access to a continuous cash flow. Many retirees use cash from an immediate annuity to supplement social security benefits and this becomes their monthly income. The important factor is to ensure your new cash flow is sufficient to cover your basic living expenses.
Get an Income Property
You don’t need to think in terms of buying an apartment or condominium to create a cash flow. You may have the ingredients for the perfect income suite in your own basement. Investing some money into converting your unused space into a comfortable spot for a potential renter can turn your home from a moneypit into an income-generating asset. Real estate income is also a terrific buffer for inflation because rental costs rise as the cost of living increases so you have a built-in layer of protection, which can be a lifesaver for someone on a fixed income.
Alternatively you could decide to move into the basement and rent out the larger part of your home if this would net you more money. This means adjusting to living on a smaller scale, but the change of pace might be just what you need in your retirement years.
While it may be difficult to handle the idea of not going in to work everyday, getting your finances in order doesn’t have to add to your stress. These are some of the best retirement investments you can look into and the good news is you can start them all on fairly short notice.