When planning for retirement, it’s important to focus on creating a well-diversified portfolio. According to this long-held investment advice, if you invest in a number of assets and some fail, the others will cover the losses and still provide you with surplus income. If you are planning for retirement, consider these investments for your portfolio.
3 INVESTMENTS TO CONSIDER DURING RETIREMENT PLANNING
- Invest in Currency
- Invest in 401ks or Roth IRAs
- Invest in Rental Real Estate
Let’s face it: Retirement planning is not an option but a necessity. If you’re not sure what to do when it comes to planning for retirement, seek out a financial planning advisor. While you might be able to do it on your own, by reading financial planning articles and get a retirement planning guide, it’s good to get some guidance on financial planning for retirement.
Whether you decide to get the help of a financial advisor or work on your own financial planning — using retirement planning tools like retirement planning software, retirement calculator, or a retirement planning spreadsheet — here are three investments that you might consider as you plan for your retirement.
1. Invest in Currency
When it comes to making money by investing, consider the benefits of investing in money itself. Many people planning to build up their nest egg invest in the foreign exchange market, usually referred to as FOREX, because it is the largest, most liquid securities market in the entire world. It is estimated that the volume of currencies traded each day is more than $5 trillion.
Here you can buy and sell currencies, as well as exchange and speculate on them. While the largest volume of transactions occurs between hedge funds, investment management firms, central banks, large commercial firms, retail brokers, banks, and many other types of financial institutions, it is still possible for the small, personal investor to benefit from profitable trades.
There are many ways to participate in the FOREX market. One way is to become a speculator. As a speculator, you can bet on changes in exchange-rates by trading in futures contracts because you know that on a given date the contract owners must either buy or sell a specified amount of currency at a pre-established price.
Another way to invest in FOREX is by making currency bets. Certain economic events, such as rising interest rates, can lift a currency. You can also make money when a currency’s value plummets. This can occur when a country has economic problems, political mayhem, or struggle with tariff disputes.
It’s fairly simple to get started with FOREX. Find an online trading platform that offers tutorials. These will also have virtual trading apps that allow you to do paper trading. For instance, you can practice buying future contracts before you put your own money at risk.
The mechanics of trading itself is fairly straightforward since FOREX is a liquid market. In fact, it’s similar to buying low and selling high. When you think the market is going to go up, hit the “buy” button on the online trading platform. When you think the market is going to go down, hit the “sell” button. If you made the right decision, you’ll win money and if you made the wrong one, you’ll lose money.
A large number of trading platforms allow you to start with a minimum account balance. Since the market is leveraged at a fifty to one ratio, you can turn a small amount of money into a handsome profit. If you have traded in stocks and mutual funds, you will find the mechanics of currency trading to be different. In the FOREX market, you trade currencies in pairs, buying one currency and selling another.
Although many combinations of pairs are possible, for the most part, however, you will trade in the following eight currencies:
- The United States dollar
- The Canadian dollar
- The New Zealand dollar
- The Australian dollar
- The British pound
- The Euro
- The Yen
- The Swiss franc
One challenge many people find is staying on top of their FOREX transactions, especially if they have full-time jobs and busy family and social lives. If this is your situation, or if you want less of a hands-on approach to investing in currency, you may want to consider long-term currency investments in currencies that show an inclination to revalue at a higher exchange rate compared to the U.S. dollar because a country is making an economic recovery.
Two currencies that may revalue are the Vietnamese dong and the Iraqi dinar. It’s possible to buy a large amount of these currencies at a low rate because of the comparative strength of the U.S. dollar. Later, when the currency revalues, you can profitably sell the currency at its higher exchange-rate. If you decide to invest in the Iraqi dinar, we can advise you on how best to select the denomination of your choice at the lowest prices and decide on the number of your selected notes.
2. Invest in 401(k)s or Roth IRAs
Back in the day, people relied on pension plans when reaching retirement age. Today, most people rely on 401(k) and Roth IRA retirement plans to ensure sufficient retirement income. Without these employer-sponsored retirement plans, retirees only have their Social Security benefits, which does not offer enough to live on during retirement years because of the increased cost of living. In fact, many economists speculate that social security may not be able to offer retirees enough retirement benefits in the future.
Although 401ks and Roth IRAs are similar in many ways, there is also an important difference that you need to know about these retirement accounts to help you make an informed decision about how to build up your retirement savings to secure a comfortable retirement. A 401(k) is a powerful tool for employees in a corporation to save money for retirement because it’s based on the compounding effect of tax-exempt contributions to the retirement account.
The money to fund a 401(k) plan comes out of employee’s paychecks, which often causes people discomfort for two reasons: First, it means that they have less take-home money to pay their bills. Second, it’s unclear how their money is being invested and how much they will be able to receive when they retire in the distant future. Still, despite these trepidations, a 401(k) plan is far better than most wage-earners assume. The simplest way of thinking about it is as a savings account that pays out when you retire. After you put your money in, it leverages the compounding power of time to grow. When you retire, you won’t get a lump sum payment but can withdraw from it for your living expenses.
However, the difference between a 401(k) and a savings account is that a 401(k) grows faster because income taxes are not taken out of a paycheck; taxation is deferred until you make your withdrawal. So, while you will pay less in taxes each year, you will have to pay them when you use your 401 (k) plan to retire. It is possible to grow a 401 (k) faster by taking advantage of matching funds and pre-tax contributions. Often an employer will match one hundred percent of your financial contributions right up to ten percent of your income. So, if you put ten percent of your income into your 401(k), then your employer will also add ten percent of your income above and beyond your salary.
An alternative to a regular 401(k) plan that an employer may offer is a Roth IRA plan. This works in the same way as a regular 401(k) except that you will pay taxes after you receive your salary, rather than later when you make withdrawals to fund your retirement. With both types of pre-retirement planning accounts, early withdrawals — those made before you reach age 59 1/2 — could hurt your retirement plan because you’ll have to pay a hefty ten percent withdrawal penalty.
Since the best retirement plans are based on expert advice, consider getting more information about 401(k) or Roth IRAs from a retirement financial planning professional. They will be able to help answer any questions you might have about early retirement planning, retirement savings, employer-sponsored retirement packages, or self-directed IRAs. They will also be in a position to answer any tax-related questions you might have about pre-tax retirement contributions, post-tax contributions, and contributions tax credits.
3. Invest in Rental Real Estate
Many retirement planning advisors recommend investing in real estate as a proven way to meet financial goals like saving for retirement and earning a steady income during retirement years. This is sound financial planning advice. You can, for example, invest in real estate investment trusts (REITs), real estate mutual funds, or real estate ETFs. You could also invest in wholesaling houses, use an online real estate investment platform, or participate in a real estate partnership.
However, one fairly straightforward way to make good money from real estate is to invest in rental real estate. Although you will have to deal with maintenance requirements and satisfying the needs of tenants, owning rental property is a stable way a retiree can continue to receive monthly income checks.
Here are three basic steps to take if you are interested in rental real estate. First, learn all you can about real estate by buying books, going to seminars, and talking to other rental real estate owners. Second, search for a rental property to buy. Calculate as best you can what your current expenses will then forecast how much you will be able to earn over the years. Since the property will not always be rented, factor in vacancy rates for the neighborhood.
Third, once you buy the property, treat your investment property as a business. Create hospitable terms for your tenants, hire qualified maintenance people, and stay on top of collecting rent and scheduling maintenance projects. When you are retired and no longer want to advertise for tenants or schedule repairs, you can always hire a property manager to take care of your real estate properties.
Investments to Consider During Retirement Planning
Whether you decide to embark on your retirement planning by researching retirement planning companies or do your own personal retirement planning using retirement planning tools and retirement planning spreadsheets, it’s advisable to start with only a few investments rather than getting overwhelmed with too many.
Starting with these three ways to grow your retirement income are good ways to build up your retirement funds and continue to enjoy retirement income when you reach the age of retirement. In fact, even if you happen to be lucky enough to receive an old age pension, you should still consider investing.
You can make more than enough to retire on from currency investing, securing a retirement account, and buying rental real estate. However, once you master these three assets, you can, of course, add more investments to your portfolio — like investing in certificates of deposit, money market accounts, mutual funds, treasury securities, dividend-paying stocks, government bond funds, municipal bond funds, and short-term corporate bond funds. Besides creating a diverse investment portfolio when it comes to planning for retirement, you can ensure a comfortable retirement.