7 Investments To Make to Have a Comfortable Retirement

Everyone knows they’ve got to save and invest in order to enjoy a comfortable retirement. However, most people aren’t sure what they should invest in. Spending your hard-earned cash on speculative investments isn’t the best idea. So, looking for low-risk investments can be an attractive option. Still, if you’d like a comfy retirement, you should diversify your assets. Here are a few ideas to get you started.

Index Funds

The stock market is almost synonymous with investments. For the most part, everyone invests in it. However, a lot of the time, people struggle to pick specific stocks. Investing in an “index fund” is an easy way to avoid this dilemma. By investing in a single fund, you gain exposure to the entire market. These investments track an index, such as the S&P 500, NASDAQ, NYSE, or other indexes. If the market goes up, so do your investments. Plenty of retirement accounts invest in these automatically and index funds typically have the lowest fees. So, they are a great place to start your retirement investment plan. And you should have at least some of your portfolio in them.

An alternative to an index fund is a “mutual fund”. Although index funds seek to obtain returns equal to the index, mutual funds tend to seek higher than average returns but also have higher fees than an index fund.

Tax-Advantaged Savings Accounts

Another easy way to put aside some funds for retirement would be to use a tax-advantaged account. For example, IRAs let you put money from your paycheck into them before paying taxes. Thus, increasing your purchasing power. By using these, you can effectively increase your annual income. A Standard IRA will allow your investments to grow Tax-Free but you will still owe taxes when you withdraw the money at retirement. IRAs provide an incentive to wait until you’ve retired before withdrawing (if you withdraw money before age 59 1/2 you will face a stiff penalty.

Roth IRAs are a little different, with a Roth you invest “After Tax” money. But the advantage is that the money grows tax-free and you don’t owe taxes when you withdraw the money. Ask your financial advisor about potential options. Both types of IRAs allow you to invest in a variety of different investments including Index funds, mutual funds, individual stocks, and many other types of investments.

Bonds

While stocks are a form of ownership, bonds are a debt owed by the issuer to the buyer. Bonds are sold by governments and are also sold by corporations. In both cases, you’re essentially lending your money to an entity. Whatever entity you’ve lent money to promises to repay you with additional interest. That interest will be your return on the investment. Typically, bonds are a lower-risk investment than other assets but still depend on the creditworthiness of the issuer. Typically advisors recommend putting a portion of your portfolio into stocks and a portion into bonds. The closer you are to retirement, the greater the percentage of your portfolio you should put into bonds. That way, stock market downturns won’t impact your retirement date.

Precious Metals

Few things have held their value as well as precious metals. Throughout history, gold and silver have been used as a medium of exchange. Historically, gold has been considered a good inflation hedge. It is pretty easy to calculate your gold’s value to track your returns. Generally, gold performs well when other investments are falling so it is also a market hedge. So, if you’ve got a funny feeling about the economy, precious metals could be a good safeguard. When currency performs poorly, gold tends to do the opposite.

Commodities

Commodities aren’t as well known as other investments. But, that doesn’t make them any less valuable. In general, a commodity is anything that serves a useful purpose in the economy. Oil and corn are both examples of a commodity. Investing in commodities lets you earn returns when their price increases. Most of the time, commodities also perform well during times of high inflation. Traditional commodity trading is done by sophisticated investors via futures contracts but you can also invest in funds that specialize in commodities.

Real Estate

Real Estate is one of the most common investments Americans make. One of the major advantages of home ownership is that you need a place to live anyway and buying a home is a forced savings plan. Home values tend to increase with inflation and allow you to buy a large investment with “leverage” i.e. you put a small percentage down but get the advantage of the gain on the whole thing. See Do Housing Prices Always Go Up? for more information on inflation and real estate.

Cryptocurrency

Among the newest types of assets, cryptocurrencies have taken the world by storm. In recent years, many investors have posted astronomical returns. These financial assets have been seen as somewhat speculative by traditional investors. Still, plenty of economists believe they’re here to stay. Don’t invest anything you can’t afford to lose, but you should still look into them.

Investing for a Comfortable Retirement

Are you looking forward to retirement? If so, then you should be thinking about how you’ll get there. With wise investments, you could retire sooner than you think. Besides, the sooner you start, the faster you’ll get there. Always research your investments before pulling the trigger, though. That way, you’ll have everything you need to make an informed decision.

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