The Most Valuable Investments for Retirement, According to Retirees

When it comes to retirement advice, sometimes the best source is from the people who have already lived it.

In a 2018 survey, GOBankingRates asked retirees to share their biggest hurdles in retirement and what they would have done differently leading up to retirement. The survey also gathered their insights regarding the most valuable assets that helped them save for retirement.

Click through to see what they said and learn about the most valuable investments for your golden years.

Both men and women in the survey identified their 401k plan as the most important savings vehicle for building their nest egg, with 33 percent of men and 35.76 percent of women ranking it as most important.

A 401k plan is so valuable to retirement savings because your contributions aren’t taxed and grow tax-free, so you won’t pay any taxes until you take the distributions in retirement.

The first step to maximizing your 401k plan is to make sure you’re taking full advantage of any matching contribution offered by your employer. For example, if your employer matches up to 3 percent of your salary, be sure to contribute at least that amount. Once you’re doing that, commit to devoting a minimum percentage of each raise you earn to increasing your 401k contributions.

Personal savings were the second most commonly identified savings vehicle that survey respondents identified as helping them save for retirement. Although it was the second most common option for both men and women, women were over 13 percentage points more likely to name savings at 34.44 percent versus 21.18 percent for men.

Personal savings are flexible — you can tap into the savings without a penalty. However, you don’t receive tax breaks on this type of retirement account.

Holding your personal savings in a basic checking or savings account will ensure that you don’t lose money — but you’ll be missing out on the higher returns that you could be making by investing that money.

Instead, consider a high-yield savings account or CD to maximize the interest you earn without participating in higher-risk investments.

Overall, stocks tied for the third most commonly identified source of retirement savings among all respondents at 11.93 percent.  A substantial difference existed, however, between men at 15.76 percent and women at just under 10 percent.

Stocks have ups and downs, but they traditionally offer some of the highest rates of return. However, many Americans — not just retirees — aren’t taking advantage of this wealth-building strategy, found a previous survey.

If you want to invest in the stock market to grow your retirement savings, keep these two things in mind: Invest for the long term, and keep your fees low.

Consider low-cost index funds to give you broad exposure to the market at a low cost, and stay invested through the market’s ups and downs so you don’t miss out on gains.

Traditional IRAs tied with stocks as the third most commonly identified source of retirement savings among all respondents, but were 5.35 percentage points more common among men than among women.

You must earn taxable compensation to contribute to a traditional IRA each year, but you can set one up yourself without having to worry about whether your employer has the plan set up for you.

Consider adding investments earmarked for retirement to your IRA instead of keeping the money in a taxable account. The money in the traditional IRA grows tax-free, so each time you realize gains or get paid interest, you can reinvest the entire amount without having to share a portion of the income with the IRS.

The downside is that if you take money out before 59.5 years old, you’ll owe a 10 percent tax penalty unless an exception applies.

Only 9.05 percent of respondents identified Roth IRAs as the biggest source of retirement savings, which might be partly because Roth IRAs have only been around since 1998 and those surveyed are already retired. Roth IRAs were a more common response from men than women by just over three percentage points.

Use a backdoor Roth IRA contribution to contribute to a Roth IRA even if your income is too high. Although there are income limits on who can contribute, Congress has officially blessed the strategy of making a nondeductible contribution to a traditional IRA and then converting it to a Roth IRA because there are no income limits on who can convert to a Roth IRA.

Bonds were the least common investment chosen overall with under 6 percent choosing this one. Men favored bonds slightly more at 6.9 percent compared to women at 5.3 percent.

Bonds typically offer lower returns than stocks but are generally less volatile. So, as people get older, they often shift more of their portfolio from stocks to bonds to minimize the impact of a market crash.

Although corporate bonds might pay higher interest rates, investing in government bonds might be a better option, depending on your marginal tax rate.

Federal savings bonds may be exempt from state and local income taxes, whereas municipal bonds may be exempt from federal taxes and might be exempt from taxation by the state or local government issuing the bonds.

Click through to see the best robo-advisors for your investments.

More on Retirement Planning

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• Best and Worst States to Retire Rich
• This Is What a Comfortable Retirement Will Cost You in Every State