Very few people plan for their retirement. A report by Retirement Benefit Research Institute revealed that only four in ten employees say that they have ever tried to plan for retirement. And out of the four, only a few actually do it.
But one fact you should contend with is that retirement planning is a key ingredient when setting retirement savings goals. Fortunately, this article has a whole lot of investment tips for retirees, so that after reading through to the end, you will without any doubt become part of the few who know what to do after retirement.
What is the Investment Strategy for Retirees?
While there is no ‘one strategy fits all’ concept when it comes to retirement planning, there is one pretty obvious thing to do – starting to save early. The moment you start saving, for example when you are in your early 30s, the earlier your money will start to accumulate, and the larger your retirement savings will be in just a few years.
That said, it is good to save whatever you can because you just can’t sit and wait for your next promotion so that you can save huge amounts. Even if you earn a few pennies every month, don’t feel like your ship has grounded to a halt, you can still save towards your retirement kitty.
So, one effective investment strategy for retirees is to strategically invest. One cornerstone of retirement planning is figuring out what amount of your earnings you can save. Where to save it is the other cornerstone.
Do you get the idea? Now, let us look at some of the top investment tips for retirement planning.
Investment Tips for Retirement
1. Cash in on Tax Breaks
Depending on your age and income level, you can benefit from tax breaks that the government provides. Note that the government cannot place funds directly into your retirement account, but the tax breaks that it provides for retirees make investing in your future way much easier.
If you or your spouse are entitled to a retirement plan at the workplace, you are allowed to claim a tax deduction on individual retirement contributions. Employees who are eligible for catch-up contributions are allowed tax deductions on individual retirement contributions.
If you happen to be within a 20% tax bracket, making investment means that your earnings won’t suffer a lot because this would save you several dollars in taxes. So, government tax breaks mean a lot to crafty employees who want to retire. Failure to take advantage of these breaks is akin to forgoing free money.
2. Plan for Your Biggest Future Expense
Retirement is almost an equivalent to old-age. Don’t get this wrong. Yes, some people retire even at 35, 40, or 45, but most employees hang the boots at 55 or 60. Sixty years is the retirement age for the majority.
And they say that health is wealth, which means that medical expenses should consume the largest part of your retirement savings. However, most people forget to set aside a special fund for health, which is wrong.
Many people get to retirement believing that the national health insurance will cover most of their healthcare expenses, only to be disappointed when they realize that this option has many gaps and doesn’t cover most of the things that seniors or retirees need. Additionally, this big insurer has high co-insurance costs.
Out-of-pocket expenses for a senior’s healthcare can go up to hundreds of dollars, which means that if you are not planning to invest a large portion of your retirement money towards your health, then you are not planning for retirement properly.
If you have a good insurance plan, it is imperative to invest in a savings account set aside specifically for your health as a senior. Similarly, you can open a separate retirement account for health if you don’t have a qualifying health insurance plan.
This way, medical expenses won’t drain your last coin.
3. Save More Than What Wisdom Suggests
This is yet another piece of wisdom that only a few financial advisers will tell you about when you go knocking their doors for investment tips for retirement.
You could be asking yourself: What percentage should you invest for retirement? Well, the “standard” rule suggests that you should save at least 10% of your total earnings for your retirement.
The problem is that this will not be enough. For example, a household with one breadwinner who takes home around $40,000 while aged 30 is likely to end up with a retirement kitty worth $ 700,000 when this particular person retires at 66. That is if you followed the 10% rule.
Most financial and savings expert advice that one way to avoid financial problems when you retire is striving to save between 15% and 20% of their current income instead of just 10%.
4. You Must Invest
“What are the best investments for retirees?” Is a great question to ask if you are planning to retire rich.
There are lots of Investment options for retirees but financial gurus say that you must invest if you want to push past your financial struggles right now and after you have retired. So, if you were looking for a valuable tip on retirement planning, then look no further.
Now, you have made a good decision to start thinking about your senior years, congratulations on that. You have even estimated the amount you need for a happy lifestyle after retirement. But if you look at your plan keenly and with a lot of honesty, it is apparent that you underestimated almost everything. Luckily, solutions are available and in plenty.
Whether you are in your 30s or 60s, there is at least enough time to make arrangements that would see your savings towards retirement last you as long as you wish. Retirement planning should accommodate financial independence, whether you are a top-earner or low-earner.
If you want your savings to last you through thick and thin and keep up with a high inflation rate, inject some funds in real estate, bonds, securities, and any other investment areas. Earning money is the best investment for retirees. Make sure that your investment offers dividends so that you can re-invest and explore new investment vehicles.
While you figure out where to invest your earnings, do not be tempted to inject more than 10% of your total earnings into one investment vehicle, simply because these games are usually unpredictable. You need a backup in case things go south.
5. Stay Out of Debts Before Retirement
When planning for retirement, it is good to write this tip in bold. Experts say that it helps to be debt-free by the time you retire. Clear off huge debts such as mortgages in time.
Unfortunately, it is never easy to trimming off debts, especially if you are operating on a tight budget. Therefore, the best idea would be to sell properties in healthy markets and downsize your expenses. For example, it would greatly help if you downsized from a mortgage to a small home that does not consume a lot of money in upkeep.
Clear off other small debts such as credit card debts, and ensure that you don’t get in the reds over small things. Perhaps you can use the cash to do all purchases, which would mean that you won’t be able to spend what you don’t have.
This way, you will be reducing existing debts while limiting new ones, which will, in turn, reduce the amount you spend on paying interests.
The best idea is to split your budget into three categories:
● Everyday expenses
This includes travel, food, house upkeep, and entertainment
Retirement funds, emergency funds and any other thing you want to save for, belong here.
● Paying off debts
The final category has its focus on both small (credit, shylock, etc.) and huge debts such as a mortgage.
If you apply this strategy, you will be killing three birds with one stone – clearing debts, living a full life and saving for the future at the same time.
6. Operate on a budget
Retirement planning and budgeting are inseparable. If this makes any sense to you, then you are aware that planning for retirement which is decades away requires that you operate on a budget today.
What this means is that you should always be smart while spending what you get.
How you budget your finances should be guided by the inflation rate and your retirement savings goal. For example, if the budget for household goods is high, you can decide to minimize the usage of certain items. Or, if you find yourself spending a lot of money at the fast-food joint, you can consider cooking such foods at your home.
Final Words on Safe Investment for Retirees
Could these tips be what you lacked when you started planning for retirement? They will go a long way to help you lead a good lifestyle after you hang your boots. These investment tips for retirees are not difficult to follow, you just need to start today and within a few years to come, you are going to experience the benefits.