What Are Considered Safe Investments
There are many different investments, each with risks and rewards. For some people, their personal finance goal is to make as much money as possible, even if it means taking on a higher level of risk. However, others prioritize stability and security and are willing to accept a lower return in exchange for peace of mind. So, what are considered safe investments? Generally speaking, safe investments offer a low but steady return and are not susceptible to sudden market fluctuations. This includes bonds, CDs, annuities, and savings accounts. While these options may not make you rich overnight, they can provide a measure of financial security in uncertain times.
Using Safe Investments For Retirement
Its true the word safe and investments dont often go together. But for those who are saving for retirement, or for anyone whos nearing retirement age, this lofty idea becomes increasingly more top of mind.
Is there such a thing as safe investments? What about safe investments with high returns? Lets dive in, as we explore the idea of safe investments for seniors that retirees or those thinking about this critical time in life may not already be in tune with. Because keeping that nest egg safe can be the difference between enjoying your hard-earned retirement, or not…
Who Wins: Cash Or Stocks
So, whats the safer place for retirees to keep their money: cash or stocks?
In a few words, for money needed in the short-term, cash and bonds for long-term investors , a thoughtful percentage in stocks.
We recognize that when the media is screaming Armageddon its hard to filter out the noise to see the opportunities. Its important to recognize that the psychology of risk avoidance will likely lead you to make decisions with your money that could hamper your ability to maintain your lifestyle. You will need to accept certain levels of volatility in your portfolio to garner the returns that will both keep pace with inflation while also allowing your income to grow.
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Cash Value Of Life Insurance
When you buy a whole life insurance policy, it comes with a cash value that rises over time. If structured right, you can use it as a source of borrowing capital for infinite banking, and possibly even decent returns over the course of decades. The cash value of your policy grows tax-free, as an added benefit.
Even so, not everyone needs life insurance. And many people dont structure their life insurance policies well as a long-term investment, either.
Even if you do need or want life insurance, raise a wary eyebrow when insurance salespeople try to push expensive policies on you. The risk of default is low, but the returns are usually low too. In most cases, youre better off investing your money elsewhere.
Risk Of Running Out Of Income
The longer you live and the more you take out of your pot, the harder it will be to make your pension pot last as long as you need it to. To try to avoid this happening, you need to manage your pension pot carefully. This includes thinking about how much to take out and how often, and how to invest your pension pot.
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Vanguard 500 Index Fund
Moving over into the world of exchange-traded funds, the Vanguard 500 Index Fund offers an excellent idea for safe investments for seniors. Designed to track the performance of the S& P 500, the VOO ETF comes off as rather vanilla. Still, when youre talking about your golden years, vanilla isnt a bad hue for your portfolio.
Of course, let me address the giant pink gorilla in the room. Because the VOO tracks the S& P 500, this ETF is down double digits for the year. Nevertheless, investors should take to heart the Oracle of Omaha Warren Buffetts words: Never bet against America.
Through ownership of the VOO, investors get the best this country has to offer. Its top three holdings are Apple , Microsoft and Amazon . Further, setting aside its most dominant weighting to technology at 25.3%, the Vanguard 500 is well balanced among the other sectors.
Are Mutual Funds Safe To Invest In
Mutual funds are pools of money managed by professional investors and can be used to purchase various securities. Many people view mutual funds as a safe investment, but there is no guarantee that you will not lose money. Investing involves risk. However, if you choose to invest in mutual funds, you can do a few things to minimize your risk. First, research the fund before investing . Second, only invest what you can afford to lose. And finally, seek investment advice using advisory or brokerage services from a financial institution to help you make the best investment choices.
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What Are Safe Investments For Retirees
As people approach retirement, they often think more carefully about their investments. They want to ensure that their hard-earned savings will last throughout their golden years, and they dont want to take any unnecessary risks. So what are some of the safest investments for retirees?
Fixed annuities and fixed indexed annuities are two popular options.
- With a fixed annuity, you know exactly how much income youll receive each month, which can be helpful in budgeting for retirement expenses.
- And with a fixed indexed annuity, your earnings are linked to the stock markets performance, but a downside protection feature protects your principal investment even if the market falls.
Both options can give retirees peace of mind knowing that their money is safe and theyre not exposed to too much risk.
What Are Fixed Annuities
A fixed annuity is an insurance product. You pay the insurance company a premium, and it pays a fixed interest rate on the premium during the accumulation phase. When you’re ready to receive income, you start the payout phase. Your premium and earnings are converted into a guaranteed income for the rest of your life.
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The Best Safe Investments For Seniors During Retirement
Shawn Plummer
CEO, The Annuity Expert
When it comes to retirement planning, safety is critical. You want to ensure that your money is invested in a way that will provide you with peace of mind and protect you from market volatility. This guide will discuss some of the safest investment options for seniors during retirement. We will also offer tips on choosing suitable investments for you!
Here Are Some Additional Items To Keep In Mind:
- If you are regularly spending above the rate indicated by the 75% confidence level , we suggest spending less.
- If you’re subject to required minimum distributions, consider those as part of your withdrawal amount.
- Be sure to factor in Social Security, a pension, annuity income, or other non-portfolio income when determining your annual spending. This analysis estimates the amount you can withdraw from your investable portfolio based on your time horizon and desired confidence, not total spending using all sources of income. For example, if you need $50,000 annually but receive $10,000 from Social Security, you don’t need to withdraw the whole $50,000 from your portfoliojust the $40,000 difference.
- Rather than just interest and dividends, a balanced portfolio should also generate capital gains. We suggest using all sources of portfolio income to support spending. Investing primarily for interest and dividends may inadvertently skew your portfolio away from your desired asset allocation, and may not deliver the combination of stability and growth required to help your portfolio last.
- The projections above and spending rates are before asset management fees, if any, or taxes. Pay those from the gross amount after taking withdrawals.
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Safe Stocks For Your Retirement
These safe stocks are ideal long-term investments for any portfolio.
- Saving for Retirement
The markets finished 2021 on a strong note for a variety of plays, including safe stocks. That isnt too surprising, given that most of the big players at Wall Street trading firms and financial institutions make a lot of their money from their year-end bonuses.
Those bonuses are made up of fund managers increasing assets under management as well as performance relative to a benchmark. But the good times also have some stronger underpinnings.
The economy is starting to digest the huge amounts of money dumped into the system during the pandemic. Its anticipating the funds committed to infrastructure moving forward. However, its important to remember that when the government approves allocations of funds, it takes years to disburse them to companies and individuals.
Its that long view were talking about here. Retirement investing is about finding safe stocks that will continue to grow year in and year out. These arent frothy meme stocks or trendy picks theyre meat and potatoes growth stocks that will be there come what may.
With that in mind, these are seven safe stocks to consider for your retirement fund:
Develop Realistic Rate Of Return Expectations
What kind of investment returns, or approximately how much investment income, should you expect to receive from safe investments? It depends on the year. For the years 2000 to 2021, your return on safe investments would have ranged from a high of 6.73% in 2000 to a low of 0.10% in 2021.
With current interest rates at historic lows, you shouldn’t expect much income from safe choices. You’ll need to add in other options if you want the potential for higher returns.
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Is Bitcoin Safe To Invest In
You should keep a few things in mind when it comes to Bitcoin. First of all, the value of Bitcoin is incredibly volatile, so theres no guarantee that youll make a profit if you invest. Secondly, Bitcoin is still a relatively new investment, so theres not a lot of history to go off of when making your decision. Lastly, there have been some concerns about the security of Bitcoin in the past, so youll want to ensure youre comfortable with the risks before investing.
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What Should Retirees Invest In
A lot of people spend their adult lives working and saving to prepare for retirement. But once you hang up your hat, you shouldnt necessarily stop thinking about saving and investing. Its not simple to know what to invest in, though, because your situation is unique and there are a number of possible investments and strategies that retirees can use to help extend their savings. A financial advisor can help you ensure youre optimizing your investment strategy and making the right asset choices for your needs.
Choose A Withdrawal Rate Based On Your Time Horizon Allocation And Confidence Level
CSIA updates its return estimates annually, and withdrawal rates are updated accordingly. See the disclosures below for a summary of the Conservative, Moderately Conservative, Moderate, and Moderately Aggressive asset allocations. The Moderately Aggressive allocation is not our suggested asset allocation for any of the time horizons we use in the example. The example is hypothetical and provided for illustrative purposes only. It is not intended to represent a specific investment product and the example does not reflect the effects of taxes or fees. Past performance is no guarantee of future results.
Again, these spending rates assume that you will follow that spending rule throughout the rest of your retirement and not make future changes in your spending plan. In reality, we suggest you review your spending rate at least annually.
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Real Estate Investment Trusts
REITs are an asset that invests only in real estate operations, such as the purchase and management of residential and commercial real estate, hotels and warehouses. A REIT may also fund other real estate assets such as mortgages. REITs are legally required to pay out at least 90% of their taxable income to investors to avoid liability for U.S. income tax, though many aim for a full 100% payout.
REITs are a particularly attractive investment because they can pay out significant dividends. A number of mutual funds such as the Vanguard Real Estate Index Fund Investors Shares or the Charles Schwab US REIT ETF invest in a large number of REITs. Participating in one of these funds is equivalent to investing in the American real estate industry. REIT-focused mutual funds can be an excellent option for retirees because they are diverse and can offer good returns. Direct REIT stocks are not suggested for people planning to retire soon since they are slightly riskier than traditional REITs.
Savings Accounts And Cds
When it comes to generating income, theres nothing safer or more reliable than FDIC-insured bank accounts and certificates of deposit . While this strategy won’t produce much income when CDs and savings accounts pay 2% or even less, it can be a fine option when interest rates rise to more attractive levels.
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What Does Safe Mean In Investing
When it comes to investments, there is no such thing as a guaranteed return. Even so-called safe investments come with some level of risk. For example, bonds may be considered safe because they typically provide a fixed rate of return. However, if interest rates rise, the value of bonds will fall, and investors could lose money. Similarly, even though stocks may be more volatile than bonds, they offer the potential for greater returns over the long term. In general, the best way to achieve safety in investing is to diversify ones portfolio across different asset classes. This strategy helps to protect against losses in any one particular area. For example, if stocks are down, bonds may be up, and vice versa. By spreading out ones investments, it is possible to weather storms in the market and still come out ahead in the long run.
Avoid The Cookie Cutter Approach
At First Financial, we dont fit our clients into a profile type. We use a unique, client-first methodology to get an honest picture of your retirement profile.
So were able to choose an asset allocation and build a portfolio that matches your needs and your tolerance to market risk.
The result is a retirement plan that achieves your goals.
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Asset Allocation Can Have A Big Impact On A Portfolios Ending Balance
Assumes a constant asset allocation, a 75% confidence level, and withdrawals growing by a constant 2.47% over 30 years. Assumes a starting balance of $1 million. Confidence level is defined as the number of times the portfolio ended with a balance greater than zero. See disclosures for additional disclosures on allocations and capital market estimates. The example is hypothetical and provided for illustrative purposes only. It is not intended to represent a specific investment product and the example does not reflect the effects of taxes or fees.
Remember, choosing an appropriate mix of investments may not be just a mathematical decision. Research shows that the pain of losses exceeds the pleasure in gains, and this effect can be magnified in retirement. Picking an allocation you’re comfortable with, especially in the event of a bear market, not just the one with the greatest possibility to increase the potential ending asset balance, is important.
Not Doing Enough Research On Your Gold Company
A concern for many first-time gold buyers is that theyll inadvertently end up working with a precious metals company that scams their customers. This can be the case when buyers dont take the time to perform thorough research into the companies with whom theyre considering doing business. To avoid getting scammed by an illegitimate business, it can be wise to do the following:
- Research your potential gold companies return policies, shipping costs, any added fees, and buy-back policies
- Request a written customer agreement, and read it carefully to ensure that you have an accurate understanding of the terms of the transaction youll be completing with a given gold company.
- Keep an eye on movements in the gold market, and consider using a gold price historical chart as a reference point. Its not always a direct reflection of the rate youll get with the gold company you work with, but it doesnt hurt to be as well-informed as possible on the field in which youre conducting business.
- Research industry terms. Understanding key terms such as spot price, liquidity, and face value can help with your precious metals purchase. Also knowing the difference between bars, bullion, and ingots can help.
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Create A Total Return Portfolio
A total return portfolio focuses on providing the best possible mix of investments to mitigate risk. This is in comparison to a cash flow portfolio, which focuses on getting you the highest possible returns. Remember: the higher the returns, then the higher the level of risk youll likely have on your hands.
A total return portfolio offers a predetermined withdrawal rate, around 5 to 7 percent per year. The goal is to obtain an average annual return that will be equal to, or greater than, your withdrawal rate. Keep in mind that the annual return is an average over a 10- to 20-year span. You will experience some fluctuations subject to market conditions. However, this investment approach is a sturdy way to protect yourself against risk and ensure stability in the long-run.
