Everyone dreams of a comfortable retirement doing the things that they never had the time or money to do when they were younger. What are safe investments for retirement? If you want to live comfortably in retirement there are three things to consider:
- Investing for retirement
- Investing in retirement
- How fast you draw down your asset pool
Investing for Retirement
We wrote about how to invest for retirement years ago.
In the up and down markets of today many investors are simply concerned with not losing money rather than putting away something for their so called golden years. The way to invest for retirement has commonly been to start early and keep adding to savings over the years. Earnings on investments compound and after a few years can equal yearly contributions to a bank account, stock portfolio, or stack of bonds and treasury bills. Many invest for retirement with dividend stocks which will provide a quarterly dividend check along with, hopefully, stock price appreciation.
Common sense tells us that you can a few risky growth stocks in your portfolio when you are young but that you will typically want to move to safer investments as you approach retirement.
Investing in Retirement
Here are some thoughts on retirement stocks.
Investors typically look for reliable income from retirement stocks. Thus it should come as no surprise that the stocks seniors love are primarily blue chip dividend stocks. Forbes writes about seniors’ stock preferences.
The retirement stocks most loved by seniors and their dividend yields are these:
- Verizon Communications, 4.46%
- Pfizer, 3.25%
- IBM, 3.04%
- Apple, 1.59%
- AT&T, 5.36%
- GE, 3.34%
- Exxon Mobil, 3.41%
- Microsoft, 2.6%
- Johnson & Johnson, 2.99%
- Intel, 2.92%
Making Your Asset Pool Last
How much money can you spend every year in retirement and not run out? How long will you and your spouse live? And do you want money to be left over for the kids? Forbes writes about safe withdrawal rates so that you won’t run out of money in 30 years.
Traditional safe withdrawal rate literature regularly makes the assumption that retirees will choose a withdrawal rate that will leave precisely no wealth after the final withdrawal in the thirtieth year of retirement. Retirees cling to the inflation-adjusted withdrawal amounts, which leaves them playing a game of chicken as their wealth plummets toward zero.
The writer looks at three scenarios:
- The classic case in which wealth is depleted after thirty years,
- The case in which the nominal value of retirement date wealth is preserved after thirty years, and
- The case in which the real inflation-adjusted value of retirement date wealth is preserved after thirty years.
Read the article for the calculations. In regard to the three scenarios what are safe investment for retirement? You will want growth, cash and stability. That takes us back to solid dividend stocks but also bonds and a portion in cash. But the bottom line is to look at what you are doing, not pay excessively for someone to manage your money and only spend what fits in your live thirty more years and beyond budget.