In decades past, virtually all invested/saved money produced a return; however, new investment strategies for American retirees are now needed given the changes in the economic climate that have occurred since 2007.
Investing and Saving
During the decades before the financial crisis hit in 2007, invested money was not only protected, but also virtually guaranteed to increase in value if it was invested in a broad range of stocks or bonds. Likewise, because the economy was doing well, banks offered decent interest rates on savings accounts, and even better ones on Certificates of Deposit (CDs). Many retirees had a broad portfolio of investments, savings, and CDs, as well as some sort of retirement income from either a private pension or from Social Security, or both.
Since the financial crisis in America and worldwide, however, American retirees have had to drastically change their investing strategies and their spending habits. In addition, many retirees have gone back to work as a result of investment losses. Further, many people who had planned to retire postponed their retirement in order to guard their financial security. What recommendations are financial advisers making now when it comes to retirees in the U.S.?
Investment Strategies for American Retirees
Investing in the stock market and bonds is very different from investing in physical property. Each retiree and and each region of the country will lean towards different types of investments.
Stocks, Bonds, and CDs
While the stock market may appear to be recovering, and at a rapid pace, financial advisers warn against putting too much of one's nest egg into the stock market. The fact of the matter is that the market is unpredictable, so putting money that you know you need into the stock market makes you vulnerable to the negative consequences should the market take another turn for the worst.
However, advisers do suggest putting some money in the stock market if the market is an investment strategy you are comfortable with. Within the stock market, choose a variety of stocks to invest in, and don't put all your money in the market. Keep some investments in bonds and CDs, as well as a sizable savings account that you can access as a rainy day fund without any early withdrawal penalties.
While younger investors can afford to gamble with some of their money, those who are already retired are generally recommended to take fewer risks in order to prevent major financial mishaps.
While many elderly people have no experience with property management or investing in real estate, purchasing real estate can be a wise investment in some regions of the country. Investing in property is certainly not for everyone. However, if you have a management company that you truly trust to represent your best interests, buying condos, apartments, or commercial space and renting them out can produce a solid return on your investment. Be sure to do the math extensively before trying this out, and make sure a really good building inspection is done before you think about purchasing.
Gifting Younger Generations
If you need your invested money to return a profit to fuel your nest egg, then this option is not for you. However, if you truly have extra money to invest, money that you are planning to pass on to your children and grandchildren when you pass away, you might consider investing the money in them now rather than later. There are several reasons to do this, starting with the tax advantage. Gifts to individuals of up to $10,000 per year, for example, are not taxed. In addition, if you have grandchildren in college or getting ready to go to college, you might just be offering the money to them at a time when they really need it.
Investing in Retirement
Whether you need your saved money to continue to grow during retirement, or you just need a safe place to keep it, there are several different investment strategies for American retirees to consider. Talk with your financial adviser, and perhaps your family as well, to see what options might best fit your needs as you reconsider the specifics of your estate planning.