Introduction
If you’re retired with a pension, you’re likely sitting on a significant amount of money. That’s great! But it can also be overwhelming to make the best use of your savings. While pensions are designed to last for the rest of your life, other investment tools available for retired people can help you plan for future expenses and ensure your money is growing. Here are five different investments that pensioners can consider when deciding how to invest their retirement savings.
1. A reverse mortgage
A reverse mortgage is a loan against your home that doesn’t have to be paid back until you move out or sell the house.
It’s often a good option for retirees who don’t have much in the way of other assets since it can help cover expenses such as medical bills and home maintenance. Since retirees have fewer expenses than working people, borrowing from their houses allows them to keep living where they want without worrying about selling their homes or moving into smaller accommodations.
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2. Annuities
Annuities are the way to go if you’re looking for a sound retirement investment tool. Annuities are a form of insurance, which means that they help protect your money from things like inflation and market fluctuations. They also give you an income for as long as you live.
If you want to protect your money and/or invest it in a way that will still give you access to it in the future (without having to worry about losing all your savings), then annuities are great tools for doing so!
3. Stocks and bonds
Stocks and bonds fall into the category of “traditional” retirement investment options. They’re the kinds of things that are often suggested to retirees because they offer two different ways for someone to make their money grow:
- Stocks—Investing in individual companies’ stocks can be risky but also offers better returns than bonds. The value of stocks can go up or down depending on how well a company performs financially, which affects its stock price (the price per share). Some people invest in mutual funds that buy shares in multiple companies at once, which can reduce the risk somewhat but won’t eliminate it. More on mutual funds in the next section.
- Bonds—Bonds are loans issued by investors to companies or governments (such as cities), which promise to pay back the amount they’ve borrowed plus interest over time. Bonds tend to have lower risk than stocks do, although this isn’t always true!
4. Mutual funds
Mutual funds are a great investment tool for pensioners because they’re easy to buy and sell, diversified, and reasonably liquid (meaning you can pull your money out of them easily).
Mutual funds are a collection of different investments that have been bundled together. They let investors buy shares in the fund based on how much risk they want to take—and how much money they must invest. The more risk you take, the higher your potential return will be.
5. Real estate
Real estate investments can be a great way to diversify your portfolio and earn steady returns. But they’re not for everyone. For example, if you’re an elderly pensioner with a mortgage, real estate may not be the best investment for you—at least not until the value of that property increases enough to pay off your mortgage in full.
If this isn’t your situation and/or if you’d like to learn more about how real estate works as an investment vehicle, read on!
Here are a couple of ways a retiree can invest in real estate:
- Real Estate Investment Trust (REIT): This company invests in real estate and pays out dividends to shareholders. These companies can be very stable investments, but they’re not always the best option for retirees. If you’re looking for long-term security, however, investing in a REIT may be just what you need—if it’s not your only investment.
- Real Estate Holding: This is when you buy a property to rent out or live in. You can also purchase rental properties with other people to spread the risk.
Don’t sell yourself short; invest wisely!
The best advice we can give you is not to sell yourself short and consider all the investment tools available. You may be afraid of trying something new, but don’t be! If your plans aren’t working out, it’s crucial that you are willing to change course if need be.
To help make investing easier for pensioners like yourself, we have identified five of the best retirement investment tools:
- Reverse mortgage
- Annuities (Fixed Income Investment Vehicles)
- Mutual funds
- Stocks & bonds
- Real estate
Conclusion
As you can see, many great investment tools exist for retirees. The one that is best for you depends on your age and your goals. If you’re unsure where to start, we recommend starting with the ones with lower fees and minimum investments. Once you have some experience under your belt, you may consider other options like real estate or annuities which may be better suited for long-term growth but also come with higher risks (and rewards).
Disclaimer: This content does not necessarily represent the views of IWB.