So you’re getting ready for retirement …
Congratulations! You’ve survived the stress and exhaustion of the daily grind. Now it’s time to relax.
You probably already have some plans. You’ve been writing your bucket list for years, and you’re about to start checking things off!
But do you know how you’re going to fund those plans? I mean, a vacation to the tropics can get pricey. And rounds of golf aren’t cheap, especially if you play a lot.
Your Social Security payments and 401k will surely cover some of your expenses. But if you really want to enjoy yourself, you’ll probably need a bit more cash.
That’s where investing comes into play.
In this article, we’ll discuss some investment options that can help you grow your retirement budget. Keep reading to learn how to diversify your portfolio.
1. Rental Properties
Investors have been getting rich off rental properties for centuries. If you have some extra cash to buy real estate, it’s surprisingly not hard.
The trick is finding the right property for your risk level.
If you buy a residential property and rent to individuals or families, you won’t have to spend a lot of money upfront. But, you can’t control what your tenants do when they sign the lease.
You might get perfect tenants who take care of the property and pay their rent on time. But on the other hand, you might end up with nightmare tenants who skip the rent and destroy your apartment.
Sometimes, commercial real estate is a better option. By renting office and warehouse space to businesses, you have the potential to enjoy long-term stability.
At the same time, you have to vet your tenants carefully. The risk here is that, if their company fails, you’ll lose them as a tenant.
Either way, buying property gives you the chance to earn monthly income throughout your retirement!
Annuities are financial investments that insurance companies sell to individuals.
They work like this:
You invest a lump sum into the company, and they return your investment with interest in monthly installments.
There are two main types of annuities: immediate and variable.
Immediate annuities are paid out inconsistent installments that are all the same size. No stress, no hassle. Every month, you’ll know exactly how much money you’re getting.
Variable annuities give you the chance to earn some extra money. The company presents you with several investment options, and you’re able to build a portfolio based on risk.
If your investments are successful, you can earn more money than you would with immediate annuities. But if your investments fail, you could end up losing money.
You can also buy a lifetime income rider. It costs extra but will ensure that you receive income even if your investments don’t perform well.
3. Stocks that Pay Dividends
Investing in dividend stocks is a low-risk option with minimal but consistent rewards.
If you’re unfamiliar with dividend stocks, here’s the deal:
Essentially, some companies reward their shareholders by cutting them in on a chunk of their profits. These payouts are called dividends, and they’re paid either in cash or as additional shares of stock.
Dividends are usually very small. For example, you might earn $1.50 for each share of 3M stock you own.
It doesn’t sound like a lot, I know. But if you own 100 shares of 3M stock, then you could make $150 per year just for holding onto it!
If you invest in stable companies that have grown steadily over time, you’re likely to see your investment increase. This will continue as long as the company remains healthy.
4. Peer-to-Peer (P2P) Investing
P2P lending (also known as social lending or crowdlending) allows you to invest directly in businesses. By lending money to entrepreneurs, you’ll be entitled to a percentage of their profits.
It’s certainly a risky endeavor. After all, you can’t be sure that your borrower’s business venture is going to pay off. But, you have the chance to receive better returns than you would on a standard investment.
As a peer-to-peer lender, you’re basically like a credit card company. You can choose whether or not to lend money based on the borrower’s financial stability.
If you invest in someone with less stability, you can charge a higher interest rate. That way, you’ll make more money if your investment pays off.
P2P lending has been around since human beings have been running businesses. However, there are some online platforms that have made it much easier. Sites like Upstart, Funding Circle, and Peerform connect investors with borrowers, and you can browse for potential investments on those sites.
5. Mutual Funds
If splitting the risk of investment appeals to you, then a mutual fund might be the way to go.
These are portfolios that let you pool your money together with other people to make large investments. You share the rewards and the risks.
There are a few different types of mutual funds:
These are low-risk investments that are likely to generate small but regular returns. They are called “income funds” because you can usually depend on them for income, as long as the economy is stable.
These are investments in growing companies with some history of success. Growth funds have a slightly higher risk than income funds, but bigger returns.
Aggressive Growth Funds
With aggressive growth funds, you invest your money into startup companies and transitioning businesses. They have a huge potential for reward, but also could completely tank.
Your nest egg needs to be kept safe and protected. But it also needs room to grow.
If you’ve got the extra money in your pocket and you don’t need it quite yet, consider investing it. A foray into one of these five opportunities could double (or even triple) the size of your bank account!
Leon Grundstein has more than 28 years of experience in real estate development, with over two decades of experience in the retirement industry. He founded Tacoma Point Ruston with a game-changing business model to promote a healthy and robust retirement lifestyle for older adults.