Many people are worried about their fate when they retire. The best idea is to start investing before you can retire. Your investments will be generating a regular income that will support you once you retire. Besides social security, there are many other income-generating investments you can focus on. For instance, fixed annuities can provide you with a guaranteed income for the rest of your life. However, they are subject to inflation risk.
Investments for Income in Retirement
When investing, it is also good to diversify your investments to minimize risks. For instance, you can mix and match your investments. The following are some investments for retirement income you can consider:
1. Stocks and Shares
Investing in stocks and shares is one of the best investments for retirement income. Buying shares means buying a unit in a company. When a company performs well, shareholders are paid dividends. Besides dividends, shareholders can also make an income when the price of shares rises.
Nevertheless, investing in stocks and shares has its own risks, but are relatively lower compared to other investments. But the good thing is that investing in shares is a good hedge against inflation. Make sure to invest in companies with a good track record of dividend payouts to investors.
2. Real Estate Investment Trusts (REITs)
You can invest in real estate without being a landlord. Real Estate Investment Trusts are companies that own and operate income-generating real estate properties. Investors pool their funds together and invest in trusts. Investors are then paid dividends from their investments.
Through REITs, you can diversify your portfolio by investing in residential or commercial properties with high liquidity. You can purchase REITs from securities exchanges or through mutual funds. Historically, REITs pay higher dividends compared to stocks and bonds.
3. Immediate Fixed Annuities
Annuities are insurance contracts that pay some fixed amount of money to someone for a specified time or the rest of their life. Annuities provide a regular paycheck after retirement. The good thing is, when you buy an annuity, the insurance firm starts paying you the month after.
There are three types of annuities; fixed, annuities, index annuities, and variable annuities. A fixed annuity is safer since it shields you against inflation, offers guaranteed repayments, and has lower fees compared to other annuities.
4. Rental Properties
Rental properties are also a good investment for retirement income. You can opt to buy or build rental properties. You can then start receiving rental income at the end of the month. Besides, rental income, the value of rental properties tends to appreciate; in case you want to sell them. This can help you make a profit.
Investing in rental properties is capital intensive and you may need to get a mortgage to build rental properties. You can invest in residential or commercial properties. There are several expenses accruing to rental properties like repairs and maintenance costs.
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5. Robo Investing
Robo investing is an automated investment where a software algorithm uses AI and data to match you with an investment. It is an excellent way to generate a passive income. To get started, you need first to get a robo advisor. Robo advisors gather financial information from an investor to understand their financial behavior. They then use AI and data to predict your financial goals and then provide you with investments tailored to your needs.
Robo investing is best suited for investors with time constraints and who have limited capital. Robo advisors automate investments so that you don’t have to manually look for investments. When there is a market drift, robo advisors automatically balance your investments to suit your needs. Your investments will be generating for you a regular income over time.
Other Sources of Retirement Income
It is an excellent idea to create multiple sources of retirement income. Besides investing, you can also save for retirement. Some of the best ways to save for retirement are through:
1. Savings Accounts
You can open various savings accounts like cash ISAs, fixed rate accounts, and regular savings accounts. When you lock your money longer in a savings account, the higher the interest you get. Fixed savings accounts tend to generate higher interest compared to other savings accounts. The good thing about savings accounts is that your principal is never at risk.
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Pensions are an excellent and tax-free way to save for retirement. You can save through your employer’s pension. It is because even your employer will be contributing money to your retirement plan. If you are self-employed, you can also sign up for a private pension. Pension schemes have great tax reliefs depending on your tax rate.
Summary of Income Generating Investments for Retirement
To live a comfortable life after retirement, you need to plan your finances well for retirement. Besides pension, it is best to invest in income-generating investments. Find low-risk investments like stocks and shares and annuities and invest in them. Put into consideration the risks associated with an investment idea like inflation risk and the risk of running out of income.