How To Invest During Retirement


Purchase Rental Real Estate

Personal Finance 101: Investing After Retirement

Rental property, which is sometimes called investment property, can provide a stable source of income for retirement.

Investment property is a business, not a get-rich-quick affair. For those with real estate experience or who want to invest time to make it a business, rental real estate can make an excellent retirement investment.

Of course, there will be maintenance costs and unexpected expenses to account for. Before you buy a rental property, you should calculate all the potential costs you may incur over the expected time frame you plan to own the property for. You also need to factor in vacancy ratesno property will be rented 100% of the time.

If youre unsure where to start, there are many outlets you can turn to for advice. Consider reading books on real estate investing, talking to current homeowners who rent out their property, and joining a real estate investment club.

Dont go out and start investing in real estate without doing your homework. It’s a risky way to incur an income, and you need to be completely prepared before investing in real estate.

How To Plan Save And Invest For Retirement

Ask anyone who’s retired, and they will say to start saving for retirement as soon as you can!

Even if it seems a long way off, it pays to start planning for retirement as early as possible. How much you need to save will depend on your own circumstances, but the sooner you start, the better the position youll be in when you eventually stop working.

WhileNZ Super can help get you by, it’s your own savings and investments that will help to make retirement more comfortable and enjoyable.

How Useful Is The Average Return

One statistic that is referred to often is the average return of an investment. Selecting an investment only because of its average return can be a very deceptive measure. For example, if you put ice on your head and your feet in the fire, will that give you an average body temperature of 98.6? Of course not.

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Strategies Available To Deal With Inflation During Retirement:

  • Continuing to hold some percentage of risky assets in the portfolio
  • Using inflation-adjusted pensions, SPIAs, and Social Security
  • Using a higher percentage of inflation-linked bonds on the fixed income side
  • Owning your residence, which will hopefully eliminate a big chunk of your expenses that rise with inflation

Invest In Income Producing Closed

How to Adjust Your Retirement Planning as You Age

A closed-end fund is an investment company that offered shares in an initial public offering . After raising funds, they buy securities with them. The company then offers shares on the market for trade.

Money doesn’t flow in and out of the fund. Instead, closed-end funds are designed to produce monthly or quarterly income. This income can come from interest, dividends, or in some cases, a return of principal.

Each fund has a different objective: Some own stocks, others own bonds, and others use something called a dividend capture strategy. Be sure to do your research before buying.

Some closed-end funds use leveragemeaning they borrow against the securities in the fund to buy more income-producing securitiesand are thus able to pay a higher yield. Leverage means additional risk. Expect the principal value of all closed-end funds to be volatile.

Experienced investors may find closed-end funds to be an appropriate investment for a portion of their retirement money. Less experienced investors should avoid them or own them by using a portfolio manager who specializes in closed-end funds.

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Start Early And Know Your Options

In planning for retirement, you identify your goals and then figure out how to save and invest to get there. A lot of retirement investing advice revolves around very specific formulas and strategies. Still, sometimes it’s helpful to take a step back and look at the big picture. Here are six basic tips to help make retirement investing a little easier.

Spicy Chili Is Like A Higher Risk Investment

The third step of investing in retirement is adding another degree of risk control by diversification. In Texas, a famous brand of chili is Wick Fowler’s Two Alarm Chili. I love this chili because it can be two-alarm, one alarm or no alarm chili. The chili comes with little packets of the ingredients to add to your meat. Notice I said meat because in Texas chili doesn’t have beans. Or, if you don’t eat meat, substitute whatever protein you prefer, just not beans.

FYI, in the 1860s, two women, known at the “Chili Queens,” became famous in San Antonio for serving their version of chili at San Antonio’s Military Plaza. Beans and tamales were served as an accompaniment to the chili. But beans were not in the chili.

But let’s get back to the Wick Fowler’s Chili. How you combine the little packets of red pepper can determine how spicy you want the chili. Are you an adventurous foodie and like spicy food? Put in the entire container of red pepper, and you’ll have the original two-alarm chili. If you prefer a moderately spicy chili or the one alarm chili, put in half the packet. And if you want to have a mild chili, skip putting the red pepper in altogether. You’ll have no alarm chili. So what does chili have to do with investing during retirement?

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Will A Market Correction Happen In 2022

If youre nervous about a market correction affecting your retirement savings, I would take the steps listed above to help you stay prepared. To be clear, no one can predict when a market correction will happen. We can look at signs, but we can never make definite statements.

Experts and analysts have been known to incorrectly predict crashes and corrections. The best you can do is stay informed, prepare your investment portfolio for retirement, and be flexible: if a crash does take your savings off course, you might want to consider postponing retirement a few years, at least until the economy recovers.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium service or advisor. Were Motley! Questioning an investing thesis even one of our own helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Spicy Investments And Standard Deviation

Investing for Income in Retirement: Planning and Withdrawal Strategies

A similar concept applies to diversification and standard deviation. If you have a spicy investment, i.e., one with a high standard deviation, combine it with investments with a mild-taste investment or one with a low standard deviation. The result would be a portfolio with a lower risk or a more moderate overall standard deviation. Kind of like cooking up the one alarm chili. The process is more complicated than only throwing together a variety of investments. Still, the principle of reducing risk by combining investments is the key takeaway.

The basis of this methodology was developed by Dr. Harry Markowitz, and it is called the Modern Portfolio Theory. Plus, Dr. Markowitz was also awarded a Nobel prize for developing the Modern Portfolio Theory.

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Pick Asset Classes That Align With Your Risk Appetite And Income Goals

With your risk appetite assessed and marked as low, medium or high, you can now build your investment portfolio. As mentioned, there are lots of options to consider, from offshore investments to ethical investments and alternative investments like physical objects . What you choose depends on your goals and risk limits. Discover more about how to invest in wine here.

Its good practice to build a diverse investment portfolio, including assets classed as high, medium and low-risk. High risk assets generate most of the growth, while the lower-risk assets cushion you against losses.

Invesco S& p 500 High Dividend Low Volatility Etf

As its name implies, this ETF aims to track an index that focuses on the S& P 500 stocks that deliver the highest dividends with the lowest volatility. It limits the reliance on specific sectors, spreading out the balance. A higher asset weight targeting utilities and consumer non-durables, combined with a broader spectrum of stock holdings, provides for more consistency and lower volatility. Rebalancing by the fund’s management team twice a year helps adjust for changing market conditions.

The expense ratio is on the higher side at 0.30%, and a somewhat low 45% total annual return — compared to the S& P 500’s 80% — total annual return over the past five years could be a turnoff, but the trade-off is that the low volatility aspect can help during a challenging market, as noted by the 5.3% gain year to date, compared to the 4% loss experienced by the S& P 500 index. It also offers the primary benefit of timely and more abundant income from monthly dividend payouts — as opposed to the more common quarterly schedule — making it easier to manage a budget when the years of timely paychecks are a thing of the past.

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Identify Your Risk Tolerance

How much risk is too much? Thats a significant question you need to ask when it comes to knowing how to invest in retirement.

Since 1973, the S& P 500 has posted an average annualized return of over 11%.

But, stocks have historically experienced massive declines of 50% or more in periods of economic uncertainty.

To help assess how much volatility you can tolerate with your investments, we recommend that you take a risk assessment quiz.

For example, here is an example of a risk tolerance quiz we created for use with our own clients. The results are generated from a series of questions designed to better understand investor preferences and tendencies when it comes to earning money and losing money.

A proper risk assessment will help you determine your willingness to lose some or all of an investment in exchange for higher potential returns.

We’ve found that individuals generally differ in the amount of risk they feel comfortable taking. You may embrace uncertainty, while others may tend to avoid it at all cost.

If youd like help understanding your own risk tolerance, just contact us.

While not guaranteed, for long-term investors who are well-diversified, corrections and downturns shouldnt be cause for panic because the market has historically always rebounded over time.

Case in point: The S& P 500 lost 37% in the financial crisis of 2008 today, it is up tremendously from its low point in March 2009. Long-term investors can weather market storms.

Investing Tips For Retired Canadians

How Much You Should Have Saved in Your Retirement Account ...

By Jonathan Chevreau on July 30, 2018

What you should, and shouldn’t do to avoid ‘pre-retirement financial stress syndrome,’ according to one author

When it comes to deploying an investor toolkit for retirement income, Id point near-retirees and retirees to a book recently published by Toronto-based investment counsellor Patrick McKeough. The book, titled Pat McKeoughs Successful Investor Toolkit, is a distillation of McKeoughs long investment career, honed first at The Investment Reporter, and in recent years his own firm, The Successful Investor.

McKeough is definitely a stock guy and is not keen on bonds, even for retirees, particularly at these still low-interest rates. Whether youre a mid-career investor still building wealth or starting to draw down on your portfolio, McKeough is consistent: he pounds the table for a conservative portfolio of quality dividend-paying stocks spread among the five major economic sectors . And, he never fails to remind you, steer clear of stocks in the crosshairs of what he calls the broker/media limelight.

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After all, long-term studies show that the stock market as a whole produces total pre-tax annual returns of 8 to 10%, or 6% after inflation, McKeough writes.

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Investing During Retirement: How To Make Your Money Last

Congratulations: it’s finally here. Retirement is a major accomplishment for most people. It often means you’ve set aside enough money to stop working and live comfortably without having to rely on a regular paycheque.

Of course, retirement means different things to different people. For some, it’s about never working again, and instead spending your days doing things you enjoy most, such as travelling, pursuing hobbies and spending more time with family and friends. For others, retirement means working part time or occasionally to stay busy and engaged in a profession, but without the need to earn a regular income.

Regardless of what retirement looks like to you, the key is to enjoy this time of your life, while making sure you don’t outlive your retirement savings. For most retirees, that means developing an investing strategy that will allow you to withdraw money from your portfolio, while still enabling it to grow over the longer term.

Below are some strategies for investing during retirement:

Delay Social Security Benefits

You might not think of Social Security as an inflation fighter, but for many people it will be their only stream of income with an automatic cost-of-living adjustment. The COLA was only 0.3% for 2017, but itâs projected to be 2.2% in 2018.

More than 45% of people take Social Security retirement benefits as early as they can, at age 62. For those who have taken early retirement, perhaps because of poor health, this often makes sense. But grabbing benefits early comes at a steep cost. If you claim Social Security at 62, your benefit will be reduced by as much as 30% compared with delaying until full retirement age . And if youâre patient and have other sources of income, you get a generous bonus for waiting until age 70 to claim benefits: For every year you wait to take Social Security beyond full retirement age until age 70, your benefit increases by 8%. Even better, future COLAs will be based on that bigger benefit.

KIP TIP: Spouses should coordinate their claiming strategies to maximize the survivor benefit. A married couple is likely to maximize lifetime income from Social Security if the higher earner delays taking Social Security until age 70, so no matter who dies first, the survivor gets the largest possible benefit .

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Investing Before Retirement Is About Revisiting Your Retirement Goals And Making Sure Your Money Is There When You Need It

Those last few years before retirement should be some of the happiest of your working life. Youve worked for decades on the promise of the financial freedom to spend more time doing what you enjoy in retirement.

The light at the end of that tunnel isnt just shining through but glaring out as a reminder the reward for your sacrifice is close at hand.

For many Americans that havent saved enough for retirement, that glaring light of retirement can be a little blinding and more than a little scary. The prospect of working until 70 years old doesnt sound very appealing but neither does living on the scraps of social security for the rest of their life.

Fortunately, there are things you can do to get your investments ready for retirement whether youve saved enough or not.

This is the sixth in our seven-part series on life-long investing. We started with how to create your own personal investment goals and understand your investor type. Throughout the series, Ive shown you exactly how your investments change as you age, how you can keep your portfolio matched to your needs and how to keep your retirement on track.

Check out the other three articles in the series:

Finally, well put together two example portfolios for pre-retirement investing that will help squeeze out additional return to meet your goals but with the protection you need to make sure your money is there when you need it!

If You Want A Million

Why it is important to continue to invest during retirement

When you’re saving for retirement, you want to make sure that you’re making the most of your investments, so when that day finally comes, you have the most money possible. The account you invest can have huge implications for how much money you’ll have when you retire and how you can best minimize your tax hit.

Below, three seasoned Motley Fool contributors review the best ways to invest for retirement in order to make the most of the money you contribute.

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Buy Bonds For The Yield

A bond is a loan to the government, a corporation, or a municipality. The borrower agrees to pay you interest for a set amount of time and return the amount you loaned them . The interest income you receive from a bond or bond fund can be a steady source of retirement income if you plan their maturities right.

Standard & Poor’s Global Ratings, Moody’s, and Fitch Ratings are companies that rate bonds. Bonds are given quality ratings, which give you an idea of the issuer’s ability to pay the yields and give back your principal.

There are short-term, mid-term, and long-term bonds. Bonds have different rates some have adjustable interest rates , and others have fixed rates.

High-yield bonds pay higher coupon rates but have lower quality ratings. Low-yield have higher quality ratings because they tend to have lower risks. Each can be used differently in a retirement plan.

For retirement, individual bonds can be used to form a bond ladder. This strategy uses the maturity dates of bonds to match your financial needs at any given time. This investment structure is often referred to as asset-liability matching or time-segmentation.

In this strategy, the intent is to hold the bonds until maturity. If you plan to retire in May of 2040, for example, and need your first payment, you will begin by purchasing a $1,000 bond that matures in May 2040. Next, you’d buy one that matures in June, then August, and so on.

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