5 Ways to Invest in Retirement

4 Mins read

Retirement gives you an abundance of time to kill, which usually leads to spending money on things such as entertainment, medical bills, and not to mention grandchildren. Retirement can be a difficult transition for some since you will be living life without a steady paycheck.  Relying solely on Social Security checks is not a senior’s first choice. That is where there are five ways to invest in retirement to you help keep a consistent income.

1. Health Savings Account

Typically, when you enter your golden years, you will begin to visit the doctor more frequently, and more health conditions may rise. With that said, investing in a Health Savings Account (HSA) before retirement is critical. A HSA is an un-taxable savings account that you can have with a high-deductible health plan to assist you in your medical expenses.

Although the only way to qualify for a HSA is through a high-deductible health plan, if you are quite healthy and do not visit the doctor often, this plan can be ideal for you. Consider your HSA as a medical emergency fund. You can use these funds for things such as deductibles, copayments, or medical equipment.

As briefly mentioned earlier, HSAs cannot be taxed; This means your money will grow tax-free, you are not taxed when you add money, and you will not be taxed when you spend the money. A great thing about this is that the money is 100% yours. There is no timeframe on when you must spend your money—the funds will roll-over to the next year and the future, which is super beneficial during retirement.

2. Immediate annuities

Annuities are considered a form of insurance, but they are something you should most certainly invest in. Annuities help seniors build an un-taxed savings account that can help with any kind of spending throughout your retirement, such as utilities, groceries, leisure, and more. According to the Gallup Survey of Individual Annuity Contracts, 65 percent of annuity owners are retired seniors.

There are different types of annuities for you to consider, but you will want to pick one that will help meet your retirement goals, such as an immediate annuity. Immediate annuities can be ideal for you if you are seeking a stable source of income fast. 

To simplify the process, you will invest in an annuity through either an independent broker, insurance company, annuity distributor, or large bank. You will then give the insurance company a lump sum of money, and the company will then invest your money in either the stock or bond market. Your annuity account will grow tax-free until you want to start receiving your payment.

This type of annuity can give you the peace of mind that you are looking for regarding steady income throughout your retirement.

3. Dividend stocks

Dividend stocks are companies that pay out their stockholders regularly. When you purchase a stock, you are buying a piece of that company. If the company you invested in is making a lot of money and they do not need that money for operations or such, they will reward you, the stockholder, with money in the form of a dividend.

The companies you would typically invest in are well-established, growing companies that are doing well in the stock market. However, stocks fluctuate, so you should not consider this a source of a fixed income. However, dividend stocks are reasonable and can still payout to their shareholders when there is a decline in the stock market.

4. Rentals homes

Investing in rental homes is perfect for retirement if you are willing to manage your property. Owning rental homes can provide a consistent, stable income. However, leasing rental homes can require more work than other passive income strategies. For example, you might receive a call at two in the morning from your tenants because a pipe broke.

You can choose the properties that you wish to invest in, who you want to rent your home, and how much you will charge rent. Let’s say it costs $1,000 for mortgage payments and the upkeep of the house, you can upcharge your tenant and set the lease for $2,000/month – the remaining $1,000 is for you to pocket. If you enjoy projects and can put in time and effort, owning rental homes can be ideal for you.

5. S&P 500 index funds

S&P 500 index funds are considered a reliable investment that can help boost your retirement fund. When you invest in these funds, you are investing in the top 500 largest American companies. Therefore, you will partially own the most successful companies in the world, such as Nationwide and Vanguard.

If you invest in a single S&P 500 index fund, you will be investing in hundreds of stocks at one time. Since you are investing in America’s top 500 companies, the likelihood of these stocks performing well is significant.  Even if there are a few companies that aren’t doing as well as the others, it will not drag your portfolio down.

These funds are some of the best index funds to purchase and can be bought at a very low price. S&P funds are perfect for beginner investors, which can impact your retirement fund significantly. Since you are investing in such a diverse group of companies, these types of funds are likely to bounce back fast if the stock market were to go down.

Retirement is the light at the end of the tunnel that you have been looking forward too. Retirement should be the time to live without fear of not having enough money to survive. If you use these five ways to invest in retirement, you will watch your bank account grow continuously.