Monthly Archives:February 2016

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Different Ways to Generate Income From Certain Retirement Investments

Did you know that retirement savings is just half of what you have to do to prepare for your latter years? Believe it or not, this is true. The other major and important item of consideration is how you are going to generate income from your retirement savings. Most retirement periods last up to twenty or more years and so the money that you may have accumulated in your investment accounts might not be sufficient, especially due to inflation. As a retiree, you have to ensure that your money is growing and generating income that you can use to live off. Without the appropriate finance, you may be forced to take a closer look at your lifestyle and make changes.

Access to Income

For a lot of retirees, there are two primary means of accessing income; one is from the regular monthly income that you receive and can count on such as social security benefits, annuity or pension. Secondly, there are discretionary funds that the retiree has accumulated over the years and can draw from. Examples of these discretionary funds are savings account, employer-sponsored 401K savings or IRA. The latter types of discretionary funds provide retirees with a way to generate income.

What about Stocks?

If you have invested in stocks from your 401K or IRA, you can use that to collect dividends. However, you have to invest in the type of stocks that pay dividends. A financial specialist will be able to guide you to the right stock picks. You can choose to receive dividends on an annual basis or quarterly basis. Of course, the stock yield will be different for each pick since stock dividends are determined by the different companies.

High and Low Yield

If you have a high yield stock, it is more risky, and lower paying dividends carry less risk and more stability. It probably is best to have both in your stock portfolio in order to balance the risks. You have another option of lower risk and that is investing in equity income funds, which are similar in nature to mutual funds, especially since you are investing in the company’s share that pay out the dividend. From this, you will receive a decent yield and therefore, consistent money to live off.

What about Bonds?

Like stocks, bonds are a great way to generate income for retirees, even in a market where the rates are increasing. Why are bonds so attractive to retired investors? The reason is that bonds offer interest payments to the investor, in addition to specific payouts as the bond becomes mature. Yes, the yield may be lower, but the generated income is stable and reliable. However, it is best to avoid bonds with long duration periods since the investment environment is controlled by the Federal Reserve and the continued rise in interest rates may hurt you. You should instead, invest in various different bonds for a cushion against increasing interest rates. If you are not interested in purchasing individual bonds, then you could consider bond funds. A professional financial specialist will be able to direct you wisely in your choices.

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How to Handle Risk in Retirement

In any investment, you will experience risk. Retirement investments are not different, even though, the risks may be lower. When you are thinking about retirement, though, it is best to consult with a retirement specialist or financial advisor who specializes in retirement. You want to make sure that your risks are calculated. That is why, it is important to start investing in your retirement at a younger age. In so doing, you will have enough time to rebound if your investment does not pay off. However, once you are nearing the age of retirement, you cannot take the same risks. In the same token, your risks don’t have to seem scary, especially if you have a knowledgeable professional working on your behalf. It is best to sit down with your financial advisor and discuss the risks of each investment and understand what to look for.

All In One

There are several ‘all in one’ investment funds that are specifically designed to make the investment process simple and giving you an easier way to lessen your risks and effectively manage your portfolio. The ‘all in one’ fund will invest in individual bonds and stocks to lessen the risk. The fund automatically rebalances the portfolio so you don’t have to remember everything on your own. To establish whether this ‘all in one’ fund is for you, it is best to speak to a financial advisor on allocation of assets and the fund’s target date, just to name a few things up for discussion.

Annual Assessment

You will handle your retirement funds effectively by scheduling an annual assessment of your portfolio with your financial advisor. This allows you to discuss any pending risks and make the necessary shift to lower your risks. An annual assessment is as important as the yearly exam you schedule with your doctor in order to make sure that you are healthy. It is also similar to the overall done to your vehicle by the mechanic for optimum performance. You should not go a year without revisiting your portfolio for determining risks and revising your financial plan for retirement. In fact, it is best to check with your financial advisor twice for the year to make sure that you are financially healthy for retirement.

Tax Breaks

It is also important to look at any tax breaks allowed by law. As a retiree, you have a few more options than the normal tax payer. However, you should look at the possible risks related to each of the options available to you. The first option is social security, which allows you certain tax breaks. It depends on the age that you started to collect on your social security payments. It also depends on the accounts that this may be combined with. If you are still holding down a job, you should take advantage of the compound effect allowed for tax-deferred income in a 401K program sponsored by your employer.

Lastly, you should spread out the possible risks. Not many people have a huge amount of money to maximize 401K contributions. Most retirees look for sizeable returns and a decent amount of money in their portfolio to arrive when they have retired. For this reason, wise investment in stocks and bonds is important.

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The Benefits of Downsizing for Extra Retirement Savings

In the United States, we live in an environment where big is assumed to be better. Supersizing is the norm for most Americans and so for that reason, downsizing is not usually a consideration or an appeal. In Texas, for example, people will oftentimes boast on how big their state is. However, Alaska could assume the most bragging rights because it is twice the size of Texas. Mount Rushmore exemplifies our passion for size. There are four presidential sculptures that are at a colossal height of sixty feet tall. Why say all of that? Well, if you are saving towards retirement, big is not always better. Many people, though, are not keen on trading in their expensive vehicles for an affordable one or their big mansion for a two bedroom townhome or condominium. That would be asking too much, right? No, it wouldn’t.

 

Retire Comfortably

If you want to retire and be able to live comfortably, you may have to consider doing so. Downsizing should not be an option. It should be part of your retirement plan. It is a necessity to use this as a survival strategy in order to extend your savings to the end of your life. Remember, an unfortunate and unexpected life event can catapult your retirement plans into a spiral.

Planning for Retirement

If you are over fifty years of age and you own your home and the kids have left the nest, you may be suffering from empty nest syndrome. You may want to hold on to the sentimental value of that home. You may find reasons to keep it, probably hoping that the children would come back home. It is time to accept that you are going into retirement some time or other. You should also accept the fact that you have to make certain changes. It is best to downsize earlier rather than later.

Do it Sooner

Don’t wait to downsize. Take the necessary plunge so you can be prepared for your retirement. Here are some things you can do to downsize your life:

  •       Eliminate clutter
  •       Donate things you don’t need (You can actually use this as a tax deduction)
  •       Trim your budget in order to improve your bottom line
  •       Sell one of your vehicles
  •       Cut down insurance deductibles
  •       Move into a townhouse or condo and sell your large home

Reduce Dwelling Space

As it relates to your dwelling space, less is always more. If you want to enjoy substantial savings, housing is the major area to examine. When you downsize your dwelling space, you reduce the added requirements of maintaining the property. It is better to get a smaller space with less maintenance. Downsizing also helps you to save money on home insurance and property taxes. This can greatly affect your cash flow in a positive way. You will also lighten and reduce your mortgage or rent load.

Even with all the savings involved when you downsize your home, there are many people who are not able to make up their minds to do it. The emotional attachment is too much for them and so they end up carrying all that debt right into retirement. That is not a sensible decision. It is best to speak to your financial advisor about this.