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Investing In Retirement

| June 21, 2017
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After decades in the labor force, you are finally ready to retire. Now that you are here, you must switch your mentality from saving to spending. For most, this change is difficult and will take time to get used to. From there, you need to figure out how to make that spending last and have enough to meet your needs. Below are some of the various types of investment options for you to use during retirement.

Bond Funds

A bond fund is a mutual fund filled with bonds. There are different types of bond funds, however. Some contain only U.S. government bonds; others will contain only corporate bonds. The interest/dividend payments made by the fund can be less than if you held the bonds individually.

Bond Laddering

Bond laddering is a portfolio of bonds with different maturity dates. You would line up the bonds from the earliest to latest maturity date. The bonds should make interest payments every 6 months until the bond matures. At maturity date you will receive your principal back.

Stock Funds

A stock fund can vary depending on what kinds of stocks the portfolio manager invests in. Growth funds invest in growth oriented stocks and sectors, like technology. Value funds focus on large companies or stable industries that usually pay a dividend.

Dividend Stocks

A dividend stock by definition is any stock that pays a dividend. Most of these are called blue chip stocks, which are large, established businesses. The advantage of a dividend stock is the income received from the dividend and also the growth potential of an equity.

Closed End Fund

A closed end fund is managed similar to a mutual fund, but the portfolio manager tends to focus on income related securities. These securities can be bonds, dividend stocks, and  many others.  A closed end fund generally has a large dividend yield, sometimes over 10%.

REIT

A Real Estate Investment Trust is one way to invest in properties without taking as big a risk. REITs can vary in characteristics depending on what types of properties it invests in. An appropriate REIT for a retiree would be one that invested in commercial or residential properties that collect lease payments.

Immediate Annuity

An immediate annuity is an insurance product. The investor usually takes a large sum of money and purchases an immediate annuity. The investor will start receiving annuity payments right away and they will last until the person passes away. The only way payments cease is if the insurance company became insolvent.

Rental Properties

A rental property is a unique way to create income every month. This is not for everyone because some people in retirement don’t want to be a landlord. It is, however, a great way to keep your mind sharp and prevent you from adopting a sedentary lifestyle.

Conclusion

There are a variety of investments that can help you fund your retirement. You should not just pick one, though. A diversified portfolio is a popular strategy to spread the risk among different investments.

Each of the investments listed above have their own unique advantages, disadvantages, and risks. Diversification does not guarantee investment gains or guarantee against decreases. When making investment decisions use the time horizon, risk tolerance, and investment objective unique to you. Please consult with a financial professional before making any investment decisions.

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