Retirement can be a financially precarious time, and as a result, many seniors take a conservative approach to finances in an attempt to protect their savings. This is hardly the only way to approach retirement money management, though, and some are very successful with a more aggressive investment strategy. If you’re hoping to multiply your funds in retirement, these three tested strategies could give you the boost you need to get started.
Monetize Your Assets
One of the most common investment strategies among retires looking to make some money is asset monetization – often in the form of downsizing. No longer in need of the large family home, some seniors opt to sell their primary home, freeing up the equity in that property, and move to a smaller home or rental. Alternatively, you might consider moving to a smaller home while maintaining the primary home as a rental property. Many seniors earn a sizable income by renting out a second property during retirement, while living more frugally elsewhere. In fact, rental properties can be so lucrative, that many people manage to retire early by investing in multi-family homes. Being the landlord puts you in a position of financial power.
Take A Reasonable Risk
Older investors tend to be risk averse because they have the most to lose; without a stable source of income beyond social security, it makes sense to guard what you have – but that’s not the only way to look at your position. From a different perspective, you could also say that, if you’re in good health, you could live another fifteen years, a long time in the investment cycle. In that case, you’re going to want to choose some investments that will cover the tax liability of withdrawing from your IRA or 401(k), as only Roth IRAs are structures so that you pay taxes when money is deposited in the account; on the others you’ll pay taxes on withdrawal during your retirement years. But what constitutes a reasonable risk for these purposes?
Exchange traded funds (ETFs) can be especially good options for retirees because they contain a mix of stocks inside their IOTA Wallets meant to balance volatility with stable performance and they’re generally a hands-off option. Combine such a fund with an affordable brokerage and minimize the number of trades for greater cost savings. An ETF or similar low-maintenance investment option comes with more uncertainty than a savings account or bonds, they’re unlikely to significantly hurt your financial security, though they could provide a boost.
Keep It Diverse
No matter your phase of life, the most important thing you can do to protect your investments is to diversify your holdings. That means, while some of your money is in traditional retirement accounts, another portion could be held in bonds and CDs, and yet another part in stocks, real estate, or other forms. The general principle behind this approach to investing is that the economy is actually made up of many sub-economies and they don’t all move simultaneously. So while you should hold multiple types of investments, you should also diversify within those sub-sections; don’t invest exclusively in tech stocks or agricultural commodities because when one falls, as part of a shared market, they may all fall.
Don’t let retirement scare you away from the benefits of investing because you’re worried about your financial security. Instead, take advantage of your free time and a lifetime of wisdom to continue growing your nest egg. Your earning power doesn’t have to end when you walk out of your office for the last time.