Senior Citizens And Investing
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When you are a senior, you tend to look forward to retiring.  This means more free time, no daily work grind, but also, no paycheck every week.  Even though you may no longer get paid weekly, you still will have bills to pay and a life to live.  Your health and lifestyle choices determine how long you will be retired for.  It could last for decades if you play your cards right!  You must make sure you have enough money.   Fortunately for you, there are financial advisors and specialty consultants that can help you live your best life after retirement.  Let’s explore ways to make your money last for as long as possible.

Social Security is usually the main income source for millions of seniors.  However, because of the shortfall in government funding, this may not be guaranteed income for the rest of your days.  Currently, financial planners are guiding people aged 50 and younger to start planning their retirement and not include Social Security as part of the plan which is unfortunate since everyone pays taxes to fund the Social Security fund.  Pensions are another source of income for many retired seniors.  Many companies stopped offering pensions years ago due to the significant financial commitment and many more are freezing or eliminating them due to economic circumstances.  There are, however, other options to plan for retirement but they all have one thing in common, you have to set aside a portion of your savings to fund them.  In retirement, most people rely on a combination of savings, such as Roth or traditional IRAs, 401K’s, investment portfolios and proceeds from the sale of their homes.

When it comes to investing, short-term investments should be part of a financial plan for seniors.  You can place money into money market accounts or certificates of deposit.  These are safe investments that earn interest.  For certificates of deposit, maturities should be staggered so that every few months one of the securities matures.  This will provide you liquidity for expenses or you can reinvest it.

Long-term investments are also a good source of income.  Bonds are ideal and should be included in your investment portfolio. Investment-grade corporate bonds that are in qualified accounts provide income for your monthly expenses.  Investment-grade municipal bonds that are in taxable accounts give you a return of principal when they mature. Portfolios should also include inflation-protected bonds like TIPS.  TIPS are Treasury Inflation Protected Securities.  These provide income and increase in maturity value if inflation rises and are secured by the US government.

When you invest conservatively, safety of principal should be your priority.  However, investing a portion of your savings to keep pace with inflation is a must.  Your retirement can last a long time so it’s important not to outlive your income and savings.  An inflation hedging investments are dividend paying stocks.  Consider investing in large cap stocks, index funds or equity income stock funds.  These investments can provide returns to outpace inflation, diversification and relative stability compared with smaller to mid-cap stocks.

Another popular choice for retirees who are looking for stable, predictable or inflation hedged income are annuities. Annuities are generally fixed or variable with respect to their returns.  Fixed annuities can give you a guaranteed income.  They have lower risk with lower returns.  Variable annuities allow for investment into sub accounts which are essential mutual funds or indices that allow for tax deferred growth that may outpace inflation just like stocks. The value of your investment can change based on how the sub-accounts perform, hence the name variable.  Variables are more high risk but they may also provide you with a higher return than a fixed annuity.  Both of these annuities are long term investments and they have penalties and fees if you do any transfers or withdraw from them early.  They can be expensive and you should only invest if you feel comfortable with all the fees associated with them.  Do your research and find the annuity with low fees, especially if you are looking for a regular source of income over a number of years.

Retirement can be an exciting time for seniors.  It can also be a difficult time for seniors and often takes some adjustment.  There are steps that everyone takes to get used to their new normal.  Investing is the same.  There are a lot of things to consider when investing part of your life savings or your monthly income.  Whatever you decide to invest in, make sure you do your research and plan accordingly.  If you have question or concerns, seek the advice of a trusted financial adviser. Make sure you set aside a set amount to invest that you are comfortable with and stick to your budget.  You ultimately choose how to invest your money. You should invest based on your risk tolerance.   No matter which way you decide to invest, always keep track of your portfolio and ask questions whenever you have one.  It is your money, and you have the right to know where it is going and how much of it is coming back to you as a profit.





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