Top 10 Financial Investment Options to Consider Before You Retire

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As you get closer to retirement, the goals for your investments change. You focus more on protecting your money than on earning the highest returns possible.

Yes, high returns are nice, but usually, those types of gains come with high risk. The probability of losing your money is greater than the likelihood of earning large short-term returns.

Frankly, high risk holdings don't belong in your retirement portfolio. Above all else, you want your hard-earned money in a safe place so it's there when you need it.

So where should you put your money instead? What investment opportunities exist to fund your future retirement?

Read more to discover the 10 best financial investment options you should consider. While you may not achieve the highest returns, these safer options pay you a consistent return.

1. Annuities

Annuities should be an integral part of your retirement portfolio because they offer significant rewards still subject to investment risk. Also, guaranteed annuities provide a tax-deferred way to grow your investment.

Here's how it works: A fixed annuity is a contract between you and an insurance company. The company agrees to manage your money and pay you a guaranteed return, usually tax-deferred. 

Your account is not liquid, so you will not have easy access to your funds, which helps you stay on track with your investment goals.

The biggest benefit of annuities is that you lock in your rate of return. As with a Certificate of Deposit (CD), you know exactly how much you will earn and when you can access it.

However, the rate of return for annuities is usually much better than you would get with a CD.

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2. Retirement Income Funds

Retirement income funds are another staple for your investment portfolio. If you are the type of investor who doesn't want to track your fund performance every day, these income funds are ideal for you.

Retirement income funds are a type of mutual fund. As such, the fund invests your money in a diversified mix of stocks and bonds. The goal of the fund is to produce monthly income, which is the name of the game for retirees.

If you are familiar with mutual funds, retirement income funds are an easy way to start your retirement investing.

3. Bonds

Bonds are another safe way to earn a return on your money. With bonds, your investment is used as a loan to governments, municipalities or corporations. In return, they pay you regular interest. 

You will receive the face value of your bond once it matures.

Experts recommend that you use a bond ladder when investing in bonds. A bond ladder is a group of bonds with different maturity dates. By investing in this way, you can meet your anticipated cash flow needs in the future.

Like many retirement investment options, bonds are lower-risk which can also mean lower returns. But your money is safe, and you'll earn regular interest and a guaranteed return upon the bond's maturity date.

4. Exchange Traded Funds (ETFs)

An ETF is a portfolio of assets that are meant to mirror the movement of a stock or bond index. For example, the ETF may track the S&P 500 or NASDAQ 100.

Although they trade just like stocks, the advantage is the inherent diversification. For the most part, ETFs are not managed like a mutual fund. A manager may make adjustments to align the fund's performance with the index.

5. Rental Real Estate

One of the biggest financial goals of retirement is to produce as many sources of income as possible. And done correctly, a house or condominium you rent out can produce positive cash flow.

When you own a property outright, that means the entire rental payment can go into your bank account, although you will likely need at least 15% of it to cover maintenance, repair and tenant acquisition costs.

If you have a mortgage on the property, you need to make sure the rent is enough to cover the mortgage and also provide a positive monthly cash flow. The obvious benefit here is that your tenants are essentially paying off your mortgage and you will completely own the property in time.

6. REITs

Real Estate Investment Trusts (REITs) are mutual funds that aggregate real estate properties. For example, your investment may go towards managing apartment complexes, commercial buildings or vacation properties.

REITs might own property directly, own property mortgages or simply manage assets and collect rent. Many REIT funds are a mixture of all of these.

Professionals manage the properties including rent collection and maintenance expenses while you receive the leftover income. The best part is, REITs are required to pay nearly 90% of their yearly taxable income, making them a great addition to your retirement portfolio.

7. Mutual Funds

Mutual funds are a diversified collection of stocks and bonds which are professionally managed. Each fund has a stated investment goal, such as high growth, income, balanced risk and so on.

Mutual funds have long been popular options for your retirement portfolio. In fact, most company 401k plans include mutual fund holdings. The biggest reasons for the popularity of mutual funds is their convenience, portfolio management, lower risk and dividend reinvestment.

8. Dividend Income Funds

Like most funds, dividend income funds are a group of stocks which are managed professionally. You receive dividends based on the performance of the individual stocks in the fund. 

Many publicly-traded companies offer qualified dividends. That means they are taxed at capital gains rates which are less than ordinary income tax rates.

As such, it might be tax-advantageous to hold your qualified dividends in non-retirement accounts, rather than inside an IRA, 401(k) and so on.

9. Individual Stocks

Owning common stocks gives you the opportunity to profit from appreciation when the price of the stock is more than the original purchase price. You also have the opportunity to earn dividends.

The cash you earn is liquid so you can access your money quickly and easily.

Having said that, investing in individual stocks is usually not a good idea for those who are retired or close to retirement. One bad investment can literally wipe away years of hard-earned savings. 

You should only invest in individual stocks if you are well-versed, experienced, and have a track record of making successful stock market trades.

10. Safe Investments

Remember, the main goal of retirement investments is to protect your assets. Earning income and strong returns are nice, but all your moves should be carefully orchestrated to limit your risks, so your money will be there throughout your retirement.

That's why it's important to include savings, whole life insurance, and CDs in your portfolio.

Your savings account does not usually pay high interest. But it's a safe place to store money you don't need to access regularly. And the Federal Deposit Insurance Corporation (FDIC) insures accounts up to $250,000 per person.

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Whole life insurance offers a guaranteed rate of return as your account builds up cash value.  You can even borrow against your cash value and withdraw it while you are still alive. This is a safe place to grow your money while also taking care of your family after your death.

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You can earn a higher interest rate with CDs than you can with most savings accounts. When you deposit your money into a CD, you cannot withdraw that money until the account reaches a specific maturity date. That date can range anywhere from several weeks to five years.

You can purchase CDs at any bank. Once your CD is set up, they will pay you interest at regular intervals. You will get back your original principal plus any accrued interest on the date your CD matures.

Final Thoughts on Your Retirement Investment Options

Building the retirement resources you need for a comfortable retirement is difficult for most people. Understand that it will likely take a mix of several investment options to achieve the level of financial success you will need.

As you consider the options above, think about your income needs, risk preferences, and your ability to manage your investments properly.

If you have questions, we would love to help. Check out our products here to see how we can help you meet your financial goals now.


Our content is created for educational purposes only. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Vantis Life encourages individuals to seek advice from their own investment or tax advisor or legal counsel.