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Investments You Should Make as a Retiree

investments to make during retirement

Many retirees who want to maintain a comfortable lifestyle, but may not have enough saved can make investments to procure a steady stream of income. In this article, we provide three safe investments you should make as a retiree.

Is $1 Million Enough for a Comfortable Retirement?

Most likely not.

A recent survey conducted by TD Ameritrade revealed that 58% of Americans believe $1 million is sufficient for a comfortable retirement. But according to a 2019 report by Go Banking Rates, a $1 million nest egg may only last retirees 19 years. Depending on where you live and uncontrollable events, such as inflation, that 19-year nest egg can be reduced significantly. And as the average lifespan increases, these numbers just won’t cut it.

The reality is, retirees may need another source of income in the event that their retirement nest egg dwindles faster than expected. While many Gen Xers and Baby Boomers who can’t give up their 9-to-5 altogether are entering the gig economy, there is another way to generate a steady stream of income during retirement: make investments as a retiree.

Investments to Make as a Retiree

The investments you make as a retiree should not be the same investments you made in your 20s and 30s. Back then, you had the liberty to make risky investments that have a greater chance of generating high returns. During retirement, don’t take the chance of making risky investments. Instead, look to investments that generate a steady and reliable stream of income, such as real estate.

Of course, every investment comes with its share of risks, but with a Self-Directed IRA, you have the ability to invest in what you understand and trust. So for example, if you do not understand how to invest in bonds, there is a world of alternative investments you can choose from. And when in doubt, work with a financial advisor to get your investments back on track.

1. Investing in Real Estate

There are many reasons real estate is the most popular alternative asset investment among self-directed retirement investors. If you manage the property well, you can produce a healthy, steady income during retirement.

A few of the most attractive features of a real estate investment include:

  • Real estate is an investment that yields a steady income on a monthly or annual basis.
  • Real estate acts as a hedge against inflation. During inflation, as the value of most investments erode, the value of real estate increases with the increase of rental income.
  • Real estate investors have more control over this tangible investment, vs stock investments where they have less control.

Before you get into a real estate investment during retirement, consider the following factors:

  • In general, real estate investments require large capital to get started.
  • Unlike liquid assets, a real estate property cannot easily be sold if you are in a bind.
  • Uptake on real estate properties can be a full-time job. If you prefer not to worry about the daily needs of the property, you can hire a contractor, but this will cut into your budget (and the goal behind making investments as a retiree is to help generate more income).

2. Investments in the Stock Market

If you want to make investments as a retiree, don’t avoid stocks altogether. When allocating funds in the stock market, only invest a small amount of your total funds and focus on companies that have shown consistent growth in the company’s lifetime, even if the growth isn’t considerable.

Don’t forget to do your homework before investing in the stock market. Your homework should look something like this:

  • Research companies that have rebounded after times of hardship and only decline when the entire market takes a hit.
  • Study the performance of particular industries – how fast are they growing?
    • Review specific companies within the industry. How is the company performing against its competition?
  • Evaluate the company’s earnings – has it consistently increased over the years? No matter how small, earning’s growth is a sign of stability within a volatile market.

Related: Tips for Making Alternative Investments

3. CD Investments

Here are two reasons you should consider investing in CDs during your retirement:

  1. You’re guaranteed a return on your investment
  2. You don’t lose money

However, CD investments aren’t as good as the above makes them sound. A certificate of deposit (CD) is essentially a loan that you make to your bank, which allows the bank to keep your money for a specified timeframe, which can be as short as three months (not common) or as long as five years (more common). Once the agreed upon time has concluded, this is known as the CD’s maturity date.

Here’s the thing:

You cannot remove the funds from the CD until the CD’s maturity date. If you do, you will face withdrawal penalties from the bank. During your retirement, you certainly don’t want a portion of your funds locked away for two or five years, or to be hit with penalties in the event that you must remove the funds.

Luckily, there is a workaround. You can choose a liquid CD, which allows you to remove funds at any time, penalty-free. The guaranteed return of a liquid CD is less than a regular CD, but it is still greater than a regular savings account and an interest-bearing checking account.

CDs are not a long-term investment, however they are considered one of the safest investments you can include in your investment planning strategy during retirement.

Learn More: Importance of Investment Diversity

Key Takeaways

When choosing investments as a retiree, the Self-Directed IRA gives you a world of investment options. But as a retiree, protecting your wealth and generating steady income should be your primary objective as you make investments during retirement.


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