Best Investments for Retirees

Take part in the best investments for retirees with Retirable.

Young or old, most financially savvy people are thinking about strategies to invest better for their retirement. But investing does not stop when you retire. In fact, the changing investment landscape requires retirees to invest differently and change the composition of assets to enjoy higher returns or steady returns.

This article looks at the benefits of investing after retirement and at the best investments for retirees. Here is how to continue growing your retirement portfolio.

Can Retirees Invest?

Retirement could present cash flow management issues. Fortunately, you can choose investments in retirement without exposing your whole life savings to the whims of the stock market.

You could invest some of your income to ensure you make regular returns or increase the value of your portfolio or retirement account over the long run. Remember, you can start with a brokerage account or find an investment management advisor, but you must make sure that you diversify your investments properly, heed the advice of your wealth manager.

14 Best Investments for Retirees

Retirees can invest in a range of assets, but you should balance cash flow, risk and return when choosing your investments. 

U.S. Treasury Bonds

Treasury bonds pay a fixed rate of interest every 6 months until they mature. They are issued over a  20- or 30-year period. You can buy Treasury bonds in TreasuryDirect or a brokerage. You can also add them directly to your IRA or 401(k) account to boost your earnings. U.S. Treasuries are considered the safest asset in the world. Remember, you can also use your investment account to add these asserts to your portfolio.

U.S. Treasury Inflation-Protected Securities 

Much like Treasury bonds, Treasury Inflation-Protected Securities (TIPS) are a government-sponsored security used to finance debt. They differ from Treasury bonds as they pay both interest and additional principal to compensate for the current rate of economic inflation. This low rate of risk unfortunately also means that TIPS generally have much lower interest rates when compared with other securities and stock options.

Mutual Funds

Many types of mutual funds exist, but some can be more appropriate for retirees looking to diversify their assets and generate returns by a specified date that are added to your brokerage account. If you have a few years until retirement, target retirement funds will protect your savings and allow you to retire on time.

Do you still have a few years till you can retire? Target retirement funds can also be good for younger investors since they are regularly rebalanced and grow more conservative as you move closer to retirement. You might also turn to an index fund or other investment products. Remember, however, you aren’t trying to earn a whole new salary. Your retirement account should retain most of the funds you are living on, with only nominal investments coming out for particular purposes.

Municipal Bonds

Municipal bonds are debt securities issued by local and state governments that are used to fund various everyday projects, such as building roads, funding schools and maintaining water treatment facilities. Investors can choose from 2 types of municipal bonds: general obligation bonds (which are not secured by an asset but by the “full faith and credit” of the issuing body) and revenue bonds (which are backed by the revenues stemming from a specific project, like highway tolls). 

Municipalities may also occasionally issue bonds backed by private venues, including non-public universities and hospitals. Municipal bonds may be short term in length, lasting only a few years, or they may take a decade to reach maturity. Municipal bonds can be a good investment for retirees because the interest earned on these bonds is not taxed. Municipal bonds have interest rates that are roughly 0.2% higher than longer-term Treasury bonds. 

Stocks

No one would suggest that retirees “play” the stock market, but stocks can be a good place to hedge your bets. Remember, you may not be looking for an instant return so much as long-term growth and diversity. The best types of stocks for retirees include:

• Consumer defensive stocks
• Blue chip stocks
• Dividend-paying stocks
• ETFs

Consumer defensive stocks include staple businesses that don’t tend to waver with the rest of the economy, including American Express, WalMart and Proctor & Gamble. Blue chips stocks include businesses like Apple, Berkshire-Hathaway and Coca-Cola. Plus, exchange-traded funds (or ETFs) offer stability because they track a particular index or group of assets.

Index Funds

Index funds are a popular and low cost investment option that provide retirees with diversified exposure to the stock market. They are funds that track an index such as the S&P 500 or Dow Jones Industrial Average, providing investors with a portfolio of large, established companies. This makes them an attractive option for retirees because they are easy to understand and require little maintenance.

Cryptocurrency

While the majority of a retirees portfolio should be in low-risk assets, it's still a good idea to have some exposure to digital assets. The industry is quickly growing, and it's established itself as a legitimate investment vehicle in financial markets. Many financial gurus, including Mark Cuban, recommend investors to have between 1% to 10% of their portfolio exposed to cryptocurrencies in some capacity. Altcoins are likely too risky for most retirees, but Bitcoin and Ethereum are relatively safe investments relative to the rest of the market.

You can either directly invest in digital assets with platforms like Coinbase, or you may opt to buy cryptocurrency related stocks. Proshares Bitcoin ETF (NASDAQ:BITO) is the 1st Bitcoin ETF available on the stock market, and other options like Grayscale Bitcoin Trust (OTC:GBTC) can give you exposure to Bitcoin without directly investing in the asset itself.

Real Estate Investment Trusts (REITS)

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 (MUTF: VGSIX) or the Charles Schwab US REIT ETF (NYSEARCA: SCHH) — 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.

Real Estate

You can invest in real estate in order to get steady returns when you retire. You can choose to speculate on a piece of land or remodel a house and sell it off quickly. If you have a substantial amount of savings, you can rent it out and enjoy a monthly income. 

Whole Life Insurance

When you invest in whole life insurance, the insurance company issues you an insurance contract that does pay death benefits. However, you also pay. premium and can pay even more money into the account. Over time, the account will accumulate cash value. Plus, these insurance products allow you to withdraw cash or even borrow against the policy. In fact, you could add whole life insurance to your workplace retirement plan by converting an existing policy to whole life.

Precious Metals

Investing in precious metals is a good way to hedge against risk and protect your money during uncertain economic times. Working with a trusted firm like Augusta Precious Metals allows you to purchase precious metals like gold and silver coins or set up a Gold IRA that invests your retirement funds in the gold sector, using 99.5% pure, IRA-eligible gold. Consider making this change to your insurance portfolio and check out APM when you’re ready to start a collection or save for the future.

Savings Accounts

Savings accounts are a great investment for retirees because they are generally low risk and offer a reliable return on investment. Accounts like high yield savings accounts typically offer higher interest rates than other low-risk investments, such as money market accounts or certificates of deposits (CDs). The funds can be easily accessed for day-to-day expenses, such as groceries, medical bills, and utility costs. Additionally, savings accounts are FDIC-insured, meaning that the principal balance is protected up to a certain amount.

Your Business

When you retire, you have a world of professional experience, and the right idea may be just what you need to start a business. You can invest some of your retirement income into a business that you are passionate about. This strategy could generate returns in addition to your investment, especially if your business is a passion project that fills a niche/need in your community or in the market at-large.

Your Children and Grandchildren

While you will not get a traditional return from your children and grandchildren, you may choose to set up trusts or dedicate funds or accounts to your children or grandchildren, ensuring that they can get a better start in life. There are also tax advantages for gifts up to certain amounts, and investment managers can help you navigate these benefits. Talk over these gifts with your accountant before making any transfers or writing any checks. Because asset allocation is key, make sure you know where all your money is going and why.

The Benefits of Investing After Retirement

Investing after retirement is often seen as risky. Many retirees shift from earning a paycheck to relying solely upon savings and fixed-income sources. However, strategic investing during this time can provide benefits. These benefits can enhance financial security and improve quality of life. By allocating funds into different investment options, retirees can help preserve their wealth against inflation. They may also have the potential to increase it. This additional income can offer flexibility in spending for healthcare, travel, hobbies, and other personal interests. Furthermore, investing acts as a buffer against unexpected expenses and financial downturns. Wise investment choices in retirement can help retirees make the most of their financial resources. This ensures they can enjoy their later years with confidence and stability.

Grow Your Retirement Income

Many retirees find that pensions and Social Security checks do not cover their living expenses comfortably. Investing can help supplement retirement income. A 2018 study showed that about 70% of retirees plan to continue investing. They intend to allocate around 13.3% of their retirement savings for this purpose. Actively managing investments may increase income and help maintain a desired lifestyle.

Support Family Members

Retirement can offer financial flexibility to help support your children or grandchildren at important times in their lives. New parents often face overwhelming costs related to housing and education. By investing, you can help build your family's education funds or contribute to private school tuition, easing financial pressures and providing your family with improved opportunities.

Pursuing Your Entrepreneurial Dreams

Retirement can be an ideal period to pursue your interests and start a business. Many retirees discover satisfaction in entrepreneurship, enabling them to participate in work that they enjoy while potentially earning extra income. Whether it's transforming a hobby into a business or starting a new venture, dedicating your time and resources to a project can be beneficial.

Purchasing Your Dream Home

Retirement can be a good time to buy an oceanfront property or to downsize since your children are in college. You could think about buying another home to rent out, which could give you a source of monthly income. Real estate tends to be a stable investment, particularly during times of inflation, as rental income typically increases with inflation, helping to protect against reduced purchasing power.

Optimize Dual Home Ownership

If you have several properties, you might benefit from short-term rentals. For example, you could rent out your winter home in the summer and do the opposite in the winter. This approach can help manage property expenses and generate substantial income, enabling you to enjoy both homes without facing excessive costs.

Protection Against External Risks

Investing helps manage and reduce risks related to inflation and market fluctuations. Inflation affects purchasing power. For example, there was a 5.4% increase in the U.S. in September 2021. Diversifying your investments can protect your financial future. Focusing on inflation-resistant assets like real estate, commodities, and certain stocks can lead to steady returns. This is true regardless of economic conditions. Additionally, with low-interest rates in the U.S. and Europe, it is beneficial to explore higher-yield investment options to maximize returns.

The table below shows the best retirement investment brokers. You can work with a wealth management platform to reach your retirement goals, change your plans, create new income streams and speak with investment advisors as needed.

Reaching retirement doesn’t have to mean the end of your investing career. No matter if you’re already enjoying your retirement or you’ve still got a few more years to make the most of your money, it’s never too late to learn more about making smart investments. Looking to invest in yourself first? A free or low-cost investment, Benzinga Pro provides you with the tools and information to support your investment decisions. Come back for more information. You can even learn how to use a retirement calculator.

Frequently Asked Questions