If You Can Save in Retirement, Put It Where It’ll Count
In economic downturns everyone tends to tighten their budgets, and that includes retirees. In fact you may find you’re actually saving in retirement after paying your regular expenses. So where should you put this ‘extra’ savings as a retiree?
You may tend to just put it into your retirement savings into a bank account. But that makes your money vulnerable to inflation and unable to participate in market upturns. Its earnings are also taxed yearly - you may as well put it under the mattress.
Better to make it work toward ensuring more for you in the future. At 65 you statistically have some 20 years of remaining life expectancy. Long before that time elapses, both inflation and economic upturns will affect your holdings.
Presuming that you’ve stashed anywhere from 1 to 2 years of easy-to-access emergency money, you should put your ‘extra’ retirement savings into investments of a longer time horizon. Here, you’re looking for equity growth – both to offset the effects of inflation and further capitalize on the eventual rebound of the economy and the stock market.
Be sure to diversify your retirement savings among a variety of equity portfolios. Although you may invest some in funds that cater to large capitalization stocks, you should try to include real estate investments, international stocks, emerging markets, and smaller U.S. stocks.
These investments will reside in your ‘taxable’ accounts since they come from investment earnings and not work earnings. And as equity-based investments, their annual earnings should be small, since you’re investing for ‘growth in principal’. They may not ‘move’ for a while, but remember, you’ve already proven you don’t need this money.
Consider this money outside your normal portfolio arranged according to your risk profile and income requirements. This way you can afford to risk a small portion of retirement savings and wait sufficient time for it to bloom.
For the most conservative investors, consider index-linked CDs. These are FDIC insured CDs that pay interest based on increases in the stock market. If the market falls, you original principal is guaranteed. If the market rises, your index-linked CD increases in value. Similar to this alternative, are equity-indexed annuities. The same principals hold. If the market declines, the issuing insurance company guarantees your principal. If the market advances, your annuity balance participates in the gain. Consult a retirement advisor to learn about your options for saving in retirement.
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Tags: prospectmatch, retirement savings, saving in retirement
February 6th, 2009 at 10:58 am
Your readers might be interested in this release by the University of Maryland’s Prof. Nancy Schlossberg - “Surviving Troubled Times.”
February 7th, 2009 at 5:56 pm
This is good advice - diversification is just as important after retirement, especially as medicial technology advances and lifespans increase. I’ve heard some scientists mention that, given the current progress of medicine, a lifespan of 120 years or more is well within reach of those who are currently middle aged.
Passive Incomes last blog post..Is The Economy Weighing on You?
February 17th, 2009 at 2:53 pm
Good post. I like to keep a fair amount in precious metals: gold and silver. The reason being that they will never completely loose value - gold or silver will always retain some value - even if the price crashes, unlike stocks.
Another reason I like gold & silver is that currently there is a lot money being pumped into the markets which will manifest itself in inflation in the future and they’re a good hedge against inflation.
Income Blogs last blog post..Jim Rogers Video on US Bailout
February 28th, 2009 at 7:33 am
Diversifying is always a plus factor when considering profit in a passive manner. For those who want to play safe and are still young, having their money entered into time deposits is enough to bring in a small fraction of income.
March 12th, 2009 at 12:40 pm
i agree, being safe and putting your money in a place that is slower growing but guaranteed is a good place at this point in time.
March 15th, 2009 at 11:44 am
I think aaa municipal and corproate bonds would be another good idea. They give income and can go up in price since they are down since last year.
Best etf funds lits last blog post..Gold double long etf.
April 2nd, 2009 at 1:04 am
Nowadays investing in gold seems like advice everyone gives. I would not advise someone to invest in holiday homes, especially not luxury homes abroad which for a long time have been overvalued because it sounds cheap. Do an investment like that and be prepared it will be hard to sell if you need to.
April 21st, 2009 at 12:12 am
i join you in this case, in this days when world is passing from the biggest crisis being safe and putting your money in such a place that is slower growing but guaranteed is a good place at this point in time.
May 12th, 2009 at 10:45 am
That’s great advice. A retiree’s worst enemy is inflation… But the silver lining in the latest economic downturn is that so many great assets are selling at low prices relative to their past worth. The right rental property can be a great investment in this climate. Rental income is offset by depreciation, and thus, is tax-free. So you beat inflation and taxes. Meanwhile, traditional blue-chips like Coca-Cola (KO) and PepsiCo (PEP) are trading at multi-year lows, offering solid dividends, no exposure to large debts, and great brand products which promise to beat inflation over the long-term.
Do what this post says… Don’t put extra savings in a low-interest bank account!
May 23rd, 2009 at 7:05 am
I like anything that provides a income. Reits and trust and even bond funds. This way i can reinvest income and make more over time. I try to average over 5% return so it keeps up with finlation and will keep my principal while i take the income.
May 24th, 2009 at 7:30 am
Diversifying your retirement assets is critical. I think right now is the best time to invest in real estate. With the vast amount of foreclosures out there, a person could easily make an investment that would double in value over the next 5 years.
June 3rd, 2009 at 2:25 am
In my opinion, the saving portfolio recommended was for someone building wealth to retire on. Someone who already has built up their retirement fund needs to worry about protecting it. A portfolio you have to live on should take less risk than a growth-oriented investment mix. This is due to your investing time horizon before/after retire.
What should that portfolio look like? I think, the beter balance.. It will have more fixed-income funds, both to generate income and to hold down volatility.
Living in Retirements last blog post..Paying for Your Social Security Pension
June 6th, 2009 at 12:53 am
I agree with the previous comment. Many people make take advantage of hard times and make money when the market is depressed - never more true than in real estate. Prices in real estate always climb back up. I saw this happen in Argentina, after the country went bankrupt.
Traceys last blog post..Sniffing Out Scammers on Sitepoint - Method #1 PPC Research
July 2nd, 2009 at 8:36 am
i agree, being safe and putting your money in a place that is slower growing but guaranteed is a good place at this point in time
July 8th, 2009 at 3:31 pm
As we transition from spenders to savers, this is excellent advice. I know this economic downturn has me changing my ways.
- Heartland Energy Colorado
August 11th, 2009 at 10:39 am
Good post. 401k is one of my investment vehicle especially when your company matches your contribution. I am lucky that my company offers 75% match of how much I contribute. Always save first before you start spending!
August 17th, 2009 at 11:58 pm
My money isn’t invested in stocks or fiat currency where the potential for hyperinflation in this current economic scenario could eat away profits. I’m in gold and silver bullion.
August 27th, 2009 at 11:16 am
People have a short memory and most are very used spending everything they have. It will come to bite again and again. Thanks for your post!
August 27th, 2009 at 6:47 pm
Diversifying your investment portfolio is the most basic rule in investing. I stashed some cash on a high yield savings account which I can easily get in times of emergency. Opposed to some of investors’ theory, I believe that the recession is also the best time to buy stocks. Share prices are low but the catch is to buy stock from good standing companies and from panic sellers. Gold and silver is a good option too.
September 8th, 2009 at 7:57 pm
I agree with you about having folks invest more of their money aggressively. It seems that most advisers tell their clients to be far more conservative than they need to be. Like you mention someone who is sixty five has a long life ahead of them if they remain healthy. Having a time line of twenty years certainly makes more sense to have a longer term growth investement strategy.
September 26th, 2009 at 12:19 pm
The right way to invest is to always do it as carefully as possible. Diversification is always smart if it is done cautiously. Investments are a valuable way to keep money working for to those who can afford to do it. Having a diverse investment portfolio can keep retirement secure and prosperous for many years.
September 28th, 2009 at 12:33 pm
Roth 401K is perhaps now the best retirement plan you can use. Even they tax you when you invest in, but it’s tax free when you withdrawal during your retirement. I made a financial calculator before for a company to compare the overall earning with 401k vs Roth 401k. Roth 401K will give you more money at the end.
October 21st, 2009 at 6:21 pm
Thank you for your retirement investment advice. Diversifying is always a good idea when investing, especially while the market is still so uncertain. I also like idea of real estate investments which are usually a pretty safe bet even in this recession. Planning for a long life is a wise choice. People are living longer and healthier so outliving your money can be a devistating consequence of longevity.
November 11th, 2009 at 5:06 pm
I work for a company that specializes in helping people TAKE CONTROL of their retirement funds. By getting it out of the stock market or a former employers 401K and rolled over to an IRA. Then you can do SELF DIRECTED IRA INVESTING, and invest in Gold and Silver or other precious metals, Real Estate, Title Deeds, buying or investing in a business. Anyways I thought some of your readers might be interested in seeing some information about Alternative investments via a SELF DIRECTED IRA.
Thanks for the Great post!
November 16th, 2009 at 12:34 pm
Great advice. I am thinking about ditching my CDs for better returns. They are just not paying anything these days.
December 13th, 2009 at 2:37 pm
Great advice encouraging people to invest for growth and spread the money among a variety of equity portfolios.
One thing I’ve learned to do to make more cash available for investing is to use the IRS Withholding Calculator toward the end of the year to adjust withholding allowances on my W-4. By doing this I get less tax withheld toward the end of the year and can invest the money. How it works is you enter tax paid to date for the year, estimated itemized deductions etc. and the calculator tells you what to put in as allowances on your W-4 for your remaining paycheck(s) to minimize your refund or amount owed.
I blogged about this a while ago - Eliminate Your Tax Refund And Pocket The Savings.
December 15th, 2009 at 8:10 am
I agree with Your Roth IRA that inflation is a retiree’s enemy, or anyone for that matter. That’s why investing in gold and silver is the key. Just recently, the National Inflation Association declared silver as the best investment of the next decade.
January 5th, 2010 at 4:11 am
Saving is a very good practice not only for your retirement but also for other things. About being conservative, well, we really can’t blame them can we?
January 12th, 2010 at 1:24 pm
I agree with diversifying your retirement money. It’s a lot safer that way.
January 18th, 2010 at 3:49 pm
Thanks for the tips on where to get the highest yields and not risk losing everything in the process. Safety and High Yields are the name of the game. I was wondering if you had any specific equity annuities that you recommend for someone with these needs in mind. I am a NY divorce attorney and am relatively young. So any tips you can offer on this limited info would be greatly appreciated. Thanks!
January 19th, 2010 at 12:18 pm
Looks like you’ve covered all the important points. Investing for short and long term, as well as diversify your investments. It can be a balancing act and usually comes to down to personal preference. In the end, having a mix of aggressive and conservative investments is best.
Also, don’t under estimate the value of investing in a small home business. Many retirees have small hobbies and time which can produce some passive income.
February 1st, 2010 at 11:27 pm
Investors are always make some mistakes that would lost their money or estate,but your advice is great and the way to diversify the retirement money is safe.
February 3rd, 2010 at 8:14 pm
Nice info here.
Good for starter freelancer. My self, have my own formula about freelance money management. Sometime people choice to get retirement from jobs for some option, including start their own business, of course start as freelance first.
This tips great for starter freelance to understand how to manage their income, because start the business is not easy like you see at the first time.
February 11th, 2010 at 2:54 am
yaa my thaought are also like you. i belive that the you should keep the retirement money in the place whre it is safe
February 17th, 2010 at 2:24 am
After retirement it is a great concern to save your money. I think one should invest their money in profitable business rather than saving the money
February 21st, 2010 at 1:51 pm
This is probably the best solution, all the rest is less certain. Retirement is a very important thing in life and should be prepared for it the right way…
February 26th, 2010 at 5:10 pm
With the economy, it is best to consult with a professional consultant to find the best and most secure way to save your money for retirement.
February 27th, 2010 at 9:57 am
i agree, investing your money where growth is slower but guaranteed is a wise decision in the current climate
March 3rd, 2010 at 7:29 am
Is it really wise to investment one’s retirement benefits in real estate? We are in the economic downturn and people, as a matter of fact, are hesitant to place their hard-earned money in any investment, much more in real estate.
March 16th, 2010 at 5:51 am
In the global financial conditions right now is the best time to invest in real estate. Through the increasing amount of closed purchases on the market, you could easily double your invested money in the next years.
March 19th, 2010 at 3:37 am
Good post. That’s great advice. A retiree’s worst enemy is inflation.
March 22nd, 2010 at 4:53 am
Great advice. I am thinking about ditching my CDs for better returns. They are just not paying anything these days.
April 17th, 2010 at 10:30 am
I agree with your way of thinking.We have to spent our money in a profitable business where you can get more by spenting less.Other than that there are some financial companies where we can save and double our money but we have to be very careful while saving our money to these companies.
April 19th, 2010 at 2:52 pm
A good thing to do before retirement is putting your money in different places. By dividing it, you are promoting more wealth. This could be in stocks, bank, or even a CD.
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May 2nd, 2010 at 11:49 am
retirement saving is very important so that in the future you will not get difficulties with your living. Thanks for sharing this useful information.
May 4th, 2010 at 3:50 am
Be sure to diversify your retirement savings among a variety of equity portfolios.I agree. No matter you are young or may have been retired, it’s the truth.
May 6th, 2010 at 8:07 pm
I agree with you about having folks invest more of their money aggressively.
After retirement it is a great concern to save your money. I think one should invest their money in profitable business rather than saving the money
May 10th, 2010 at 3:05 am
Great advice encouraging people to invest for growth and spread the money among a variety of equity portfolios. Having a time line of twenty years certainly makes more sense to have a longer term growth investement strategy.
May 10th, 2010 at 2:26 pm
In Europe following years there will be a big problem about retirement, because we get our retirement income from our younger generation, if it goes like that, we don’t have a chance to get retirement income.
May 13th, 2010 at 1:47 am
It’s best to save for your future but make sure to invest into something worth it like small farm where you can stay as soon as you retire or engage into small business where your earnings will directly go to your retirement savings, or simply open a bank account that you can only access after retirement. But regardless of the preparation, make sure that you are prepared, not only financially, but also emotionally and that’s what others tend to forget.
May 14th, 2010 at 3:43 pm
Roth 401K is perhaps now the best retirement plan you can use. Even they tax you when you invest in, but it’s tax free when you withdrawal during your retirement. I made a financial calculator before for a company to compare the overall earning with 401k vs Roth 401k. Roth 401K will give you more money at the end.
May 26th, 2010 at 9:55 am
We have seen the price of oil go from $30 to $140,alternate energy stocks are the next big investments .So here you can safely diversify your retirement savings as we are soon to turn into a energy-hungry nation!!
May 31st, 2010 at 1:52 am
While its true that investing your retirement can benefit in the long run, we must diversify our investments to make sure it is safe & our future income is guaranteed.
May 31st, 2010 at 6:32 am
TBH I lost faith in saving for my retirement a long time ago. I had put a load of money into a private pension (a directors pension) then saw its value nose dive. I’ve since sunk my money into property. I’m hoping my other house will provide me with a fairly steady income when I retire (from rent).
Cheers,
Bob.
June 3rd, 2010 at 2:10 am
Retirement savings is really very important for your future use. We must really diversify our retirement savings among a variety of equity portfolios. This article is very informative.
June 3rd, 2010 at 8:31 am
In the UK savers should make use of their ISA allowance each year. As this article suggests, you should always diversify. ISAs shield your cash and investments from tax, and the earlier you start the bigger your tax free pot will become. Many people in retirement rely on these savings - but can only do so as they planned their finances properly.
June 5th, 2010 at 11:56 am
This info will be a lot useful when taking into account the age of the investor. When a person is younger he should allocate a higher portion of his retirement funds into stocks and other more risky investments, but those which might bring that extra yield. On the other hand, at a later age, stock investment should be moderated, making sure that the available funds will not drop like a rock just before retiring….
June 10th, 2010 at 7:02 am
Retirement will be enjoyed if your savings are put on worthy things that will still help you grow even you’re getting older. Something that will make you busy like having a small business on your own.
June 26th, 2010 at 9:39 pm
well preparation is needed before you retire.
good article, thanks.
June 29th, 2010 at 6:15 am
John Doe, yes right….better slower but guaranteed than faster but high risk. my opinion gold is the best investment for this situation.
July 6th, 2010 at 3:17 pm
There are some good strategies for diversification. Does anyone have advice on the dos and don’ts of hiring an investment firm or accountant to handle the manage the investments?
July 11th, 2010 at 3:08 pm
Great article. We all need to prepare before we retire.
July 19th, 2010 at 4:52 am
Really great post, full of valuable information. Diversification of retirement saving is really important especially with inflation and economic crisis. Goal should be to reinvest your income smartly to make it grow and earn more with your investment.
July 19th, 2010 at 6:59 pm
While many people are having a hard time trying to save money for retirement, I am one of the lucky people who’s place of employment offers up to a 5% match on any contributions I make in my 401k.
This is great for me as the money is taken out of my check before I ever get it, so it makes saving a whole lot easier.
July 22nd, 2010 at 8:51 am
A great article that can help people retire with piece of mind. One additional thing to consider when investing is using passive investing. Good luck everyone.
July 30th, 2010 at 2:04 pm
Great article. Retirement saving is extremely important now more than ever.
August 3rd, 2010 at 8:39 am
The best advice from this article for me is “diversify your retirement savings among a variety of equity portfolios” we saw pertty bad examples ended up foreclosures espacially in that retirement age, most people could not choose the retirement because they do not have enough money to rely on, we have to secure our money for retirement for sure. Thanks for sharing.
August 5th, 2010 at 12:47 pm
Yes, the money what we get at the time of retirement is the last money earned by us. It should be utilized properly and it has to be invested after making sure that we will get good returns out of it.
August 8th, 2010 at 6:55 pm
Saving in retirement, now this would be wonderful achievement and a dream, I might add, for most retirees savings is near impossible, unless very good guidance was achieved pre retirement.