Retirement has historically been a time to play it safe with one’s money, but economic planners caution that too much conservatism can be risky.
With life expectancy continuing to increase and inflation nibbling at savings, boomers must strategically plan how they invest their money. Even begrudgingly, taking a few shrewd steps now can guarantee their money holds out for the next 20 to 30 years.
Hold Some Growth Stocks (Yes, Yes)
Pulling entirely out of the stock market is one of the largest errors made by retirees. While it’s understandable to be drawn toward bonds and cash during retirement, CNBC experts point out that boomers still require growth in order not to outlast their funds down the road. Holding a minimum of 30% to 40% of a portfolio in the form of stocks can help combat inflation through a multi-decade retirement. Rather than selecting individual stocks, blue chips that pay dividends or broad market ETFs give consistent growth without the anxiety of trading daily.
Treasury Inflation-Protected Securities (TIPS)
Inflation continues to be the largest single threat to retirees, quietly diminishing the purchasing power of savings. According to Kiplinger, TIPS adjust their principal value for inflation, making purchasing power in line with increasing costs. Although returns don’t seem so glamorous as with traditional bonds, the built-in inflation hedge makes them a necessary part of a retirement portfolio. With the added combination of dividend-paying stocks and real estate investment trusts (REITs), they provide a well-rounded inflation shield.
Real Estate Investment Trusts (REITs)
Too many boomers have costly houses but are reluctant to invest in property. REITs provide a means of accessing commercial property, medical facilities, and industrial real property without the hassle of dealing with tenants or maintenance. They also normally pay greater dividend yields than regular stocks, providing retirees with a consistent flow of funds while insulating against inflation.
High-Yield Savings and Money Market Accounts
Liquidity, so easy to overlook, is another important consideration. Declines in the market can leave retirees struggling if all of their funds are invested long-term. That is why money market funds and high-yield savings accounts should be considered. U.S. News notes that these will not make retirees wealthy, but 2025 rates are competitive. They also allow for ready access to money in times of need – something certificates of deposit (CDs) tend not to provide owing to lock-in provisions.
Target-Date Funds (Post-Retirement)
Lastly, target-date funds, which are too frequently left behind after retirement, warrant reconsideration. Vanguard describes how their Target Retirement Funds put money into diversified index funds that cover thousands of U.S. and foreign stocks and bonds. Target-date funds automatically shift allocations as the retirees grow older, eliminating the uncertainty of rebalancing. For boomers who do not wish to have the hassle of constantly rebalancing their portfolios, target-date funds are an easy yet efficient option.
Balanced Portfolios Assure Enduring Funds
With today’s volatile financial world, boomers simply can’t rely on just “safe” investments. A balanced strategy involving growth stocks, inflation protection, real estate exposure, liquidity alternatives, and automatic portfolio management can assure that retirement savings endure. Whether it seems counterintuitive or not, these strategic decisions could be the best option for financial peace of mind in the future.
