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How Much Do You Need To Retire?

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Saving money to fund a comfortable retirement is perhaps the main reason people invest in the first place. Finding the right balance between investment risk and return is critical towards earning regular income after retirement.   

In this article, we will be sharing some investment options you may want to consider when generating regular post-retirement income, but first, here is something to note about retirement saving timing. 

Are You Keeping Up with Your Retirement Savings?  

It’s essential, to start saving for retirement as early as possible. The sooner the better as this will help compensate our financial stability in the event the market takes a downturn upon retirement age. The result of your efforts to save will depend on the age at which you start your retirement savings, the amount to be saved each month, and the assets you have already acquired. 

To earn a more consistent retirement income, you need to start saving early. For example, starting your savings at age 35 with a minimum of $250 – $500 per month is recommended –of course, depending on your income. Consult your financial adviser for the saving strategy.  

Investments Options

Life insurance 

Life insurance is one of the preferred retirement investments for many people in the US as it has tax advantages and options to access capital as income when in retirement. In fact, some policies such as Index Universal Life (IULs) allow you to grow your savings on contract calmly while generating capital that tracks market indexes.  This allows you to approach your retirement with some level of security knowing that your savings is unlikely to see volatile swings in value.  

ETFs  

ETF stands for Exchange Traded Fund.  

ETFs are generally made up of a collection of large, mid, and small cap stocks.  Each ETF has an industry scope in which they create the fund around.  For example, some are heavy in tech, others in material such as gold, silver, copper, or some in energy related sectors.   

Investing in an ETF will usually lead to steady growth that is less volatile. This is due to the broad or diverse composition of the fund itself, as these stock variations and their associated volatility tend to create a balanced growth trajectory for the fund overall. 

Buy Bonds for the Yield (interest) 

A bond is essentially a loan to the government, municipality, or corporation. You get paid interest for an agreed period and then the borrower returns the amount you loaned them –the principal. So, the interest you get from the borrower can form a steady source of income during your retirement – but you need to plan your maturities right.  

There are long-term, short-term and mid-term bonds, all with different rates. Some of them come with fixed interest rates while others have floating rates (adjustable rates).  

For retirement planning, individual bonds can be used to form a bond ladder. This strategy uses the maturity dates of bonds to match your financial needs at different times. 

Rental Real Estate Investment 

Rental property, or investment property, can offer a stable income source at retirement when done right. It’s important to understand that buying a real estate property is a business and not a get-reach-quick avenue.   

If you have some experience or interest in real estate, you can invest some time and make it a business –which can offer decent regular income at retirement. But of course, you need to account for maintenance costs, taxes, and unexpected expenses. You also need to account for vacancy rates, since they won’t always be occupied 100% of the time. The vacancy rates in the U.S currently average at about 8.2%. 

The Bottom Line 

Just because you’re about to retire doesn’t mean you’re not a long-term investor. The above four investment options should give you an idea of where you may want to allocate some of your savings for some decent income during your retirement. 

The purpose of this article not to offer a comprehensive retirement investment guide, but to point you in the right direction. For comprehensive retirement and savings guidance, consult a financial professional, who can account for your current financial status while advising you on where and how to invest.   

References  

  1. https://www.forbes.com/advisor/life-insurance/how-it-works/
  2. https://www.investopedia.com/terms/e/etf.asp
  3. https://www.statista.com/statistics/186392/vacancy-rates-for-rental-units-by-us-region-since-2000/
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