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The Best Investments to Save for Retirement

Hey everyone! Working with a brand to bring you a little investment knowledge! My actual day job is in the investment management industry and I want to do with what I’ve learned moving forward. Stay tuned!

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The Best Investments to Save for Retirement

The recent Northwestern Mutual’s 2018 Planning & Progress Study revealed that the vast majority of Americans are “somewhat” or “extremely” concerned about not having enough money saved for retirement. Remortgaging your Philadelphia townhome may not be the answer either. About one in five have nothing saved at all, while 10 percent have less than $5,000.

Those are some shocking statistics that might cause you to take a look at your own savings and do something about it now. If so, you might want to think about making one or more of these investments.

Open an IRA

Consider opening an IRA (individual retirement account) to help grow your retirement savings. You can choose from a Traditional IRA or a Roth IRA. What’s right for you depends on your income and whether you and/or your spouse already have a retirement plan through your workplace. Merrill Edge offers a tool here that can help you determine which one is best for your situation.

Work-Sponsored Retirement Plans

If your employer offers to match 401(k) plan contributions, be sure to take advantage of It as it’s essentially free money. Many employers will match every dollar contributed with a dollar, providing a 100% return on your investment.

Micro-Investment Apps

You can also take advantage of technology to save money by using micro-investment apps. They allow you to round up the amount of your purchases to the nearest dollar, tucking what would otherwise be spare change into an investment account. Oftentimes you can begin by investing as little as $5, and there’s no need for a financial advisor or broker as you can do it all from your smartphone. They typically offer exchange-traded funds (bundles of bonds, stocks and other investments). Research the options to select those that suit your risk tolerance and overall strategy before getting started.

Investing in Real Estate

In addition to saving for retirement through a 401(k) or IRA, you may want to consider investing in real estate. You could buy into a fund that invests in real estate investment trusts (REITs) to gain global diversification in real estate, which be good investments to hold when the general stock market is in decline. They aren’t correlated with stock exchanges, which means that they’re unlikely to go down with the rest of the market. Purchasing real estate outright to generate an income stream after you retire is another option. That may be a rental property, or a multi-family home that you can live in in one section and rent out the other, reducing living expenses while paying down the mortgage balance. Just keep in mind that there is a risk when it comes to finding and keeping good tenants over long periods of time.

Peer-to-Peer Lending

Peer-to-Peer Lending, through platforms like Prosper and Lending Club (more often referred to as P2P), has become increasingly popular. It matches borrowers and investors online, benefiting both. Basically, it’s like lending without using a bank. You’re likely to get a higher interest rate than what you would by investing on the stock market, but the risk/reward varies considerably depending on who the money is lent to.

 

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