For most people, becoming a senior means you’ll be approaching retirement. More importantly, being retired means the end of an earning period. Many retirees can find it challenging to make market-linked investments on a fixed income. Luckily, there are several great options seniors have when it comes to building a strong retirement portfolio.
REITs – Real Estate Investment Trusts
REITs invest in direct equity in properties and mortgages. They pay dividends to their investors and yield at higher rates than stock dividends. This is a great investment to hold when the stock market is experiencing negative fluctuations because REITs are not directly linked with the stock exchanges. That means they are at low risk of declining with the rest of the declines in the market.
These are debt securities issued by the county, state, and municipal governments and their agencies. The interest you earn on these is tax-free due to federal income purposes. If you live in the state where the bond is issued,you may also be exempt from local and state taxes. A twenty-year municipal bond has an average of .2 percent higher yield than a thirty-year Treasury bond. That’s a short maturity tare with a higher yield. Not to mention the tax-free benefits in a municipal bond.
Annuities are contracts between you and an insurance company. They include a guaranteed return at a fixed or variable rate. The performance of annuities is partly determined by the stock market. Although, your contract may include a clause that limits your slump risk in the event that the market does see a decline. Make sure you fully understand the product and contract before jumping into an annuity, they can sometimes include high fees.
Peer-to-Peer Lending or P2P
This investment takes place online and matches borrowers and investors in loans that benefit both parties. In this form of lending, there is no bank needed as an intermediary. The level of risk is all based on who you decided to lend your money to. According to Forbes, the four best lending platforms for P2P are the Lending Club, Prosper, Upstart, and Funding Circle. Through the use of modern day technology these platforms allow borrowers and investors to connect much faster and far cheaper than any bank to market. With low interest rates in the economy right now and other government bonds bringing in negative yields, investing in a P2P loan an be one of the safest (depending on who you loan to) and smartest investments for seniors to make right now.
When making any investment and financial decisions, we recommend speaking to your financial advisor.