FAQ-How should I be invested in retirement? [Video]
How Should I Invest My Money in Retirement?
Once you retire, you may be asking the questions: “How do I invest my money in retirement?”or “Should I even invest my money in retirement?”
Maybe you worry about investing. Who wouldn’t? It’s your hard-earned money after all! And you put it to work throughout your careers, so it seems reasonable that you want to do the same when planning for your retirement.
Where does one begin if they are interested in understanding and managing their portfolio in retirement? The good news is that there are plenty of options and ways to invest, plus there are certified financial planners willing to help.
Let me at least give you some things that you can consider when thinking about how to invest in retirement. And note: These are things you can consider at any stage of investing.
Consider Your Time Horizon
One of the first things to consider is your time horizon. How long do you anticipate your retirement being? We know that’s impossible to answer accurately, but you can get an idea of how much money you have and how long you want to see that money last. You’ll want to scale the risk to time, so as time goes by, maybe you can be a little bit more comfortable with risk. However, as you get closer to needing to withdraw the money, then you may want to take less risk.
What is Your Relationship With Risk?
Ask yourself, “What is my relationship with risk?” In our industry, we call that your risk tolerance, and that’s something that’s going to be unique and personal.
Some of us have a high-risk tolerance. We don’t mind taking risks at all. Others have a very low-risk tolerance. We don’t like taking risks at all and we want to ensure everything is as safe as possible before making any moves.
An advisor can help you determine your risk tolerance; how much risk you’re willing to take and how much money you’re ready to lose before you give up on the opportunity, product, service or whatever it may be.
But, suppose you don’t know your relationship with risk and how much risk you’re willing to take on. In that case, this is a great opportunity to speak with a financial advisor who has experience with asking the right questions and helping you identify your risk tolerance.
Investment Options for Consideration
Keep in mind that investment options are “tools” and it is important to remember that you don’t just pick up the nearest or shiniest tool to start working. Figure out what your job is and what your end goals are and then choose the best tool to get the job done.
Retirement investment options are many and varied, and the best options for you depend on the job you want them to accomplish-so you can pursue your financial goals while considering your risk tolerance and your time horizon.
Suppose you’re thinking about retiring soon or are already retired. In that case, it’s essential you understand the various types of retirement investments available to be able to choose the best fit for your needs and goals.
For example, if you have a low tolerance for volatility and are looking to retire in the next five years, you may want to invest in vehicles that take less risk.
If you’re planning to retire in the next ten years, and you can afford to take on more risk, that’s when tools that take more risk start making sense.
Here are a few general investment options, or tools, to become familiar with so you can choose the right tools for investing in your retirement:
High-Quality Dividend Stocks
High-quality dividend stocks are companies that have been around for a while, pay dividends regularly, and consistently increase those dividends over time.*
*Please keep in mind that like most investments,past performance is not indicative of future results.
Liquid Alternative Investments
These include direct lending, private real estate, public and private credit markets, and reinsurance. These funds are designed to take more risk than is allowed by traditional index funds.
Certificates of Deposit
Certificates of deposit (CDs) are a type of savings account that usually comes with an interest rate that’s slightly higher than what you’d get from a regular savings account, but you have to lock up your money in the account for a certain period of time in order for the bank or credit union to pay you the promised rate. Typically, the longer you commit your cash, the higher the interest rate will be.
Annuities
Annuities are an option to lock in long-term income. They can also provide tax–deferred growth, which means that your original investment isn’t taxed until you start taking withdrawals at retirement.
Annuity providers typically offer several types of annuities, including fixed and variable income. The difference is that with a fixed income annuity, you’re guaranteed a specific rate of return on your money. With variable income, your interest rate will go up and down with the market.
You can invest in an immediate annuity or deferred annuity. An immediate annuity starts paying out immediately, while the deferred start is paid out years later (sometimes as long as 10 years). This gives you more time to take advantage of the tax–deferred growth offered by many deferred annuities.
For more information on the advantages and disadvantages of CDs and Annuities, check out our related articles:
Annuities Have Big Tax Advantages Over CD’s
Consult a Financial Advisor
When it comes down to it, there’s no one single best way to invest. And with all the different goals you have for your retirement years (like spending your time with your grandchildren, traveling or pursing your hobbies), finding the right financial advisor to help you choose the plan that is best for your situation is key.
For many, having an advisor on their side who is knowledgeable, cares about them, and has their best interests in mind can be extremely valuable.
Check the qualifications and experience level of any prospective advisor before investing with them. While certifications and professional designations are not everything, advisors with legitimate designations have demonstrated a desire to go the extra mile in their professional training.
It’s important to be clear about what you want when choosing a financial advisor. Setting up multiple interviews allows you to compare advisors and select the one that best fits your needs. You want someone who meets your needs, as well as meshes with your personality
We take great pride in what we do at Medallion. We understand that finances can be complex and often intimidating and that many of you are just looking for some guidance from someone you can trust. Click below to schedule a free consultation and let us help you make sense of it all.
The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contract. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply.
Investing involves risks and there is no guarantee that any particular strategy will work under all market conditions or protect against loss in a declining market. Diversification and asset allocation may reduce some risks of investing, but do not guarantee a profit or ensure against a loss in a declining market, they are methods used to manage risk.
For over 30 years, federal employee retirement planning has been a key focus of Medallion Financial Group. We recognize that FERS retirement benefits have extra layers of complexity, such as the Thrift Savings Plan (TSP), 401K, Pension plan, FEGLI and more. It’s easy to get lost in a sea of bad advice when so few people understand the basics. We help with the basics and beyond to enable our clients to get the education and advice they need to retire with confidence. Our focus is twofold: first and foremost, we are fiduciary advisors. We stand against any violation of laws, values, and ethics. Second, we treat our clients as part of our family, not only those who call Maryland and Georgia home, but clients across the US who have benefited from our reputation of personal service, integrity, and expertise.We strive to exceed client expectations – because we have high expectations of ourselves.
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