Approximately half of older Americans don’t have anything in their retirement savings accounts, or any accounts for that matter.
This figure is worrying given that, in old age, few people can manage to have reliable income on an active basis. Even worse, their needs will be increasing as they get older.
To avoid being part of the unlucky half, there are a few well-researched investments you can place your money in and watch it grow.
Learn about the different types of investments that you could be missing out on. Continue reading if you want your money to work for you.
Considerations for Your Investments
When making a choice between the many investment options available, you need to asses your level of risk tolerance, and the time you have for the investment.
These aspects work as follows:
a) If you’re close to your retirement, you should go for the less risky options which almost guarantee you a return. The same goes for those with short term goals as you’re more likely to receive your returns on investment. The downside is that the returns will be medium to low.
b) If you don’t see yourself retiring soon, riskier but well-evaluated options will suit you. These are great especially when you have a stable income you can rely on in the case they fail. While these riskier investments have a higher rate of return, they also come with a higher chance of failing.
Thus, you need to be wise in your choices. The good news is that the following list has some of the most reliable investment options. They include:
1. Invest in Yourself With Health Insurance
As you age, you’re likely going to experience poor health owing to the natural deterioration of the body. While keeping yourself healthy is an option, the body can only remain in good condition for so long.
As such, you need the right health insurance broker with whom you can build an insurance fund. This fund will enable you to meet your health needs at a time when you won’t have active income.
2. Money Market Accounts
These are deposit accounts that earn interest and are often insured by the Federal Deposit Insurance Corporation (FDIC). Compared to savings accounts, money market accounts earn a higher rate of interest. They, however, require a higher minimum balance.
If you just began investing and need an investment for your emergency needs while it grows, few types of investments beat this one.
The downside to this investment is that you’re restricted on the number of times you can make withdrawals from your account.
3. Bond Funds
There are three main types of bond funds as follows:
Government Bond Funds
These are mutual funds which invest in the debt securities issued by the government together with its agencies. These funds get invested in government debt instruments such as treasury securities like T-bonds, T-bills, and T-notes.
Municipal Bond Funds
These bond funds get invested in various municipal bonds which get issued by the state and local governments. The interest earned from these funds is often free of any taxes.
Short-Term Corporate Bond Funds
These are bonds issued by firms other than the government. They come on a short-term basis and have high rewards.
The downside to corporate bond funds is that they’re not insured by the FDIC. This means that they lack the confidence of the government and are thus riskier than government-issued bonds.
All these types of bonds come with a high level of liquidity in that you can buy and sell them as you wish.
4. Certificates of Deposit
Another investment earning higher interest rates than savings accounts are the certificates of deposit (CDs).
These are financial instruments issued by banks and insured by the FDIC. Once you make the deposit, your money starts earning an interest every month. You can then withdraw it plus the interest at the end of an agreed period.
If you need your money to grow and won’t be using it too frequently, certificates of deposit are the best investment option.
The downside of this type of investment is that the money will get locked as agreed with the bank. If you need it earlier, you’ll need to pay a penalty for that.
5. Stocks That Pay Dividends
With stocks, you can earn money through their appreciation and payment of dividends. The best stocks will give you both types of returns. As such, you’ll earn frequent dividends in your stocks as the actual stock gains value with time. If you need to, you can sell it with a profit.
6. Treasury Securities
One of the best things to invest in for a secure future are treasury securities such as treasury bills (T-bills), treasury notes (T-notes), and treasury bonds (T-bonds).
The government uses these securities to raise funds to pay for debts and fund projects in various sectors of the economy.
They work as follows:
T-Bills
They mature in a year or less and don’t bear any interest. You earn from the discount rate they have off their actual values. For instance, a $10,000 T-Bill may be priced at $9,900. At the date of its maturity, you’ll earn $10,000 instead of the $9,900 that you paid.
T-Notes
These mature either in 2, 3, 5, 7, or 10 years. They earn interest every six months and their prices may be at a premium or a discount.
T-Bonds
These have the longest maturity periods as they only mature after 30 years. Their interest accrues every six months with the premium paid at their time of maturity.
These are among the safest investments as you’re guaranteed to receive your investment and returns as agreed.
Learn About the Different Types of Investments
Having solid knowledge of the different types of investments stated is crucial to making the right investment decisions. This knowledge will also enable you to pick the option that’s most suitable for your needs. With a good investment, your sunset years will be free of financial problems.
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