5 Safe Ways To Invest Your Savings With an Eye on Retirement

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October 31st isn’t just for celebrating Halloween. It’s also National Savings Day! While soon, you’ll be going door-to-door with your little trick-or-treaters, it’s never too early to start thinking about what it might look like to take your grandkids trick-or-treating, too.

National Savings Day marks a great time to thinking about retirement and planning for your future. Everyone wants to be able to live comfortably in retirement, and nobody wants to be a burden on their children. So proper planning and saving are essential for making your retirement as comfortable and financially independent as possible.

The first step is making sure you have a large enough nest egg to support your golden years. Here are a few of the safest places to invest those savings while keeping your long-term retirement plan in mind.

IRAs

An individual retirement account (IRA) is a long-term investment account designed to help individuals maximize their retirement savings or supplement an employer-supported 401(k). There are several types of IRAs, but traditional and Roth IRAs are the most common.

Each type of IRA offers different tax benefits. With a traditional IRA, you may deduct contributions from your income each year, but the earnings on contributions are not taxed until you withdraw them. You must wait until age 59 ½ to make withdrawals without paying penalties. Both Roth IRA contributions and earnings grow tax-free until you withdraw them.

With IRAs, you can put money aside now, let it grow in the stock market and avoid paying taxes on it until much later in life, after it has accrued a lot more value. You can open IRAs with banks, credit unions and many other financial institutions.

Long-Term Bonds

Bonds are debt securities offered and guaranteed by the federal government, municipalities or corporations. Unlike stocks, which may rise and fall in value very quickly, bonds are a fixed-income security that have regular, predictable return rates. This makes them a good supplement to a stock portfolio, as well as a strong vehicle for investing for your retirement.

When bonds mature, the issuer pays back the bond’s value, or principal, to the bondholder. At that point, not only have you received interest payments for the duration of the time you’ve held the bond, but you also get your money back. It’s almost like you’re providing a loan to the financial institution rather than the other way around.

Long-term bonds tend to have maturity dates of 10 years or more. They usually have higher interest rates due to the added risk of holding the bond for a longer period of time. Longer bonds are also more sensitive to interest rate changes.

High-Yield Savings Accounts

Your day-to-day savings and checking accounts can still be important factors in your retirement savings.

Consider for a moment the difference in interest payments between a savings account with a 0.5% annual percentage yield and one with a high-yield 4.5% APY. Most financial institutions today offer at least some kind of high-yield savings account.

With $40,000 in the account and no additional deposits, you’ll have just $40,200.50 after a year with a 0.5% APY. With a 4.5% APY, that total would be $41,799.18. That’s nearly eight times more saved in the same amount of time, without risking your money in the stock market. 

High-yield savings accounts can be both a good way to earn short-term gains that you can re-invest in long-term investments like bonds or IRAs and a way to create better savings habits for the long term.

Property

Buying property is certainly not without risk but considering home values today are about 50 times higher than they were in 1950, it’s safe to say the housing market generally improves over time.

Many Americans choose to sell their homes and move into smaller ones in retirement after the kids have left the nest. Assuming you’ve owned a home for a while, it’s very likely it’s worth a lot more now than it was when you bought it. As such, selling a family home or an investment property when you no longer need it can provide a great retirement windfall.

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