Investing After Retirement

In a world of longer life expectancy, rising healthcare costs and lower Social Security benefits, making your retirement savings go as far as possible is critical. Investments can provide more income that helps you cover essential expenses and even make it possible to save for aspirational goals like travel, donating to charity or leaving an inheritance.

The best way to invest after retirement depends on your age, income needs, financial goals and comfort level with risk. While some experts suggest becoming more conservative with your investments as you approach retirement, this can lead to a lower return and reduced purchasing power over time.

If you’re a younger retiree, it’s generally recommended to maintain an equity-heavy asset mix. Since you have several decades to go until full retirement, there’s more time to benefit from the long-term growth potential of stocks. And while there is always the possibility of loss, you have the time to recover from stock market downturns and other unforeseen events that could come your way.

Regardless of your investment strategy, there are some common investments to consider in retirement. One option is real estate, which can be an excellent source of passive income if you have the means to own and manage rental properties. Another popular choice is dividend stocks, which pay a regular income that can help you stay ahead of inflation and maintain your spending power.

You may also want to consider low-risk fixed income investments, such as Treasury securities and Certificates of Deposit (CDs). With these types of investments, you lend money to government or corporate entities that are looking to raise capital. When the bond reaches its maturity, you receive your initial investment back plus interest.

As you approach retirement, you can also begin to derisk your investments by increasing the percentage of bonds and reducing the portion that’s invested in higher-risk assets like equities. But it’s important to remember that derisking isn’t a “flip of the switch” – it should start well before retirement, and be gradual.

Finally, you may want to consider earmarking some of your savings for guaranteed income streams, such as annuities. These can provide a steady stream of income in the form of annuity payments, which are typically taxed as ordinary income. And while annuities may not be as liquid as stocks and mutual funds, they can be a valuable safety net for your retirement portfolio.