Retirees Reveal the Best Investments They Ever Made
Written by
Rafaela Stalbalk Klose
Edited by
Zuri Anderson
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Choosing the right investments is crucial for retirees aiming to secure financial independence and maintain a comfortable lifestyle.
Drawing from real-life experiences, here are four standout investment strategies that have proven effective for retirees.
Real Estate Rental Income
Buying a duplex early in retirement can significantly improve financial stability. In one example, rental income from the second unit covered most of the mortgage. After selling some vacant land to pay off the loan, the retiree could live comfortably without relying on Social Security.
According to AARP, rental properties are a smart option for retirees. Rental income can cover housing costs, offering a stable lifestyle. Properties can appreciate over time and provide tax advantages, including deductions for mortgage interest, property taxes, insurance, repairs, and management fees.
Depreciation and the 20% pass-through deduction under the Tax Cuts and Jobs Act further enhance the tax efficiency of rental income. Additionally, a 1031 exchange allows investors to defer taxes when reinvesting in another property, helping investments continue to grow.
Practical tip: Focus on units with strong cash flow, low vacancy risk and manageable maintenance costs. Consulting a tax professional can ensure all deductions and strategies are maximized.
Dividend-Paying Stocks
Dividend-paying stocks can offer reliable income and long-term growth. One retiree, a former software engineer, invested in defensive sectors like utilities and consumer staples. Dividends provided steady cash flow while the stocks appreciated, supporting a comfortable early retirement.
According to Kiplinger, dividend stocks are valuable for retirees seeking consistent and growing income. Many companies increase dividends annually, helping protect against inflation. Berkshire Hathaway, for example, holds dividend-paying stocks like Bank of America and Coca-Cola, which have raised payouts for many consecutive years.
Practical tip: Seek companies with a history of stable dividends, low payout ratios and strong financials. Reinvesting dividends can compound growth over time.
Professional Guidance and Consistency
Professional financial guidance can be crucial for managing retirement. Farther, a retirement advisory firm, reports a case study of a client in their early 60s who retired from a corporate job. The plan focused on maximizing pension and Social Security, building reliable income, and managing health-care and long-term care risks. Expert guidance provided stable income and peace of mind.
A Pacific Investment Research case study highlights how retirees with multiple mutual funds and retirement accounts sometimes face overlapping risks. With professional guidance, clients implemented a tax-efficient strategy that balanced risk and aligned portfolios with their retirement goals. Disciplined management and steady investing helped grow retirement savings with confidence.
Practical tip: Working with a certified financial planner or retirement advisor can help avoid common mistakes, manage risk and maintain a tax-efficient strategy.
Diversified Mutual Funds and Other Assets
Diversifying portfolios with mutual funds, bonds, REITs, and international equities has helped many retirees manage risk and grow savings. According to Vanguard, spreading investments across different asset classes helps reduce risk while still allowing for growth.
Asset allocation, dividing money across stocks, bonds, and other categories, reduces reliance on any single investment and smooths out market fluctuations. Regular portfolio reviews and rebalancing keep retirement goals on track and protect savings from unexpected market swings.
Practical tip: Periodically check and adjust your portfolio. Including multiple types of investments can improve stability and help maintain steady growth over time.
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