The 3 Best Investment Options for Those 60+ in 2021
Investing in your 60s is much different than investing when you’re younger. This is in part because you’re going to need that money a lot sooner than a young person would. Investing wisely can be a great way to supplement Social Security benefits and other income streams.
But that fact also makes retirement investing a little trickier. You don’t have the margin of error you probably did when you were in your 30s or 40s, so you need to be more careful and thoughtful when choosing assets to invest in. Simply put, you aren’t placing long-term bets. These are returns you’re going to need to see within the next decade or so.
Risks of investing over 50
Getting older means that investing is riskier than in your younger years. However, this doesn’t mean that you should avoid investing altogether. While there are risks, making wise investing decisions can help to keep your portfolio at a healthy level.
Time isn’t on your side: Investing in your later years is very different because time isn’t on your side. In the past, if you made a bad call, you had plenty of time to recoup those funds. However, in your 60s, you don’t have decades to undo a bad investment.
This means that you’ll want to make more conservative investments that aren’t overly risky. While your returns won’t be as high as they were in the past, it’s still possible to find money-making investments.
Longevity: As you get older, longevity risk becomes more real. If you outlive your retirement savings, you’ll be stuck between a financial rock and hard place. Social Security alone isn’t sustainable. These payments will have you just above poverty level.
This is why it’s important to manage your portfolio and to make sound investing decisions. In your older years, it’s best to avoid investing in high-risk assets that could lead to significant losses.
Health: Getting older comes with an increased risk of health problems. Seniors often face years of poor health, which can lead to unexpected medical costs. Having to spend thousands of dollars (or more!) than you didn’t budget for will impact your financial security.
The best way to mitigate these risks is to prioritize your health. Get regular preventative care and take the necessary steps to protect and improve our health.
Seniors should consider a health savings account or some other dedicated investment health for healthcare costs.
Real estate investment trusts
Real estate investment trusts (REITs) involves investing in a company that owns, operates, or finances several income-producing real estate properties. Two of the largest U.S.-based REITs include Crown Castle International (CCI) and American Tower Corp. (AMT). These REITs yield 3% and 2%, respectively.
What’s beneficial about REITs is that they’re required to distribute 90% of their taxable income to their investors in the form of dividends.
This is a guaranteed high yield, which you won’t find with stock dividends. The combination of high dividends, and the ability to develop and/or sell properties for quick cash, offers a good total return for senior citizens.
Dividend paying stocks
In times when equities can be quite tumultuous, dividend paying stocks are a worthwhile option. Dividends tend to be higher than safer investments like U.S. Treasury bonds and certificates of deposit (CD).
While there’s still some time to wage against stock risks, dividend paying stocks offer the chance to earn quick money. Each time the stock price rises, dividend payouts increase.
The combination of income and growth will help to keep your portfolio ahead of inflation. Even during the worst market cycles, companies with a history of dividend payouts remain committed to their shareholders.
One of the most reliable dividend paying stocks is Procter & Gamble Co. (PG), which has paid uninterrupted payouts for over 60 years.
To lower your risk with dividend paying stocks, write covered calls on them. This gives you the right to buy or sell the stock at a specific price during a set timeframe. With a covered call, if you hold a stock, you can sell a call option above the stock’s current price. In turn, you receive a premium payout.
Annuities are a contract with an insurance company. There are many different types of annuities to choose from, but many offering a guaranteed return at a fixed (or variable) rate. While fixed annuities are the most common, if you’re looking to earn higher guaranteed interest rates, consider a:
- Variable annuity
- Fixed indexed annuity
- Immediate annuity
- Deferred annuity
When opening an annuity, pay close attention to the fees and commissions, along with other charges. Because annuities are quite complex, take the time to ensure that you thoroughly understand the product. You’ll also want to consider how the annuity may impact your tax liability.
Investing as a senior citizen isn’t necessarily riskier than investing in your younger years, it’s just different. However, choosing the right assets can benefit your portfolio and your financial standing both now and in the future.