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In order to ensure a healthy financial future in retirement, you will need to invest some of your money now in various places. Unfortunately, social security benefits aren’t going to give you enough to sustain a comfortable life during your golden years. Luckily, there are high and low risk investments that you can consider to pad your retirement income.
Investing and Your Taxes
Some types of investments like a 401k and Roth/IRA accounts, Universal Life and government issued savings bonds are tax-free. Meaning you don’t have to report them on your yearly taxes. Other investments such as stocks, savings accounts, and mutual funds you must report the money you made annually. If you have a lot of different sources tied up in investments earning dividends, you may want to hire a local tax prep professional to help you.
Low Risk Investments
There are several types of investments that are classified as a low risk to the buyer. Bonds such as a treasury and savings come with the backing of the federal government and carry little or no risk to the investor, making them desirable to someone with limited income or someone not willing to take a risk. They do however have a maturity date and if you need to cash in early you won’t get the full face value.
Life insurance policies such as whole life and universal provide you with a way to cash out at retirement. These types of policies are exempt from taxes and give you the added option of borrowing from them too. Many utility companies also allow the public to purchase their stocks and while you won’t get rich, you can make a nice profit when you leave the stock active for many years. Another low risk retirement vehicle is a money market account. These are not guaranteed to yield high dividends, however, the return of your initial investment is almost a given.
High Risk Investments
Investing in the stock market is risky business, unless you buy into things like utilities. However, if you plan to leave your money sit for many years, a relatively small investment can lead to wealth in your retirement. Venture capital, IPO’s and emerging foreign markets are such stocks that carry with them a huge risk and the potential for a big loss. However, they can also allow you to turn a large profit rather quickly.
If you don’t know anything about the stock market and you understand the risk and still want to invest, your best bet is to sign up with an investment company and use the knowledge of a stock advisor to your advantage. They can create a diverse portfolio that includes both high risk and safe stocks. As the need arises they can also change your portfolio to make the most of your investment.
Living out your retirement years comfortably is important. Thankfully, if you plan ahead and invest your money wisely, you’ll have the money you need to enjoy your golden years.