7 Ways To Retire Without Investing in the Stock Market
Written by
John Csiszar
Edited by
Angela Corry
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
The stock market is a popular investment for those saving for retirement because it has an enviable track record. The S&P 500 index, for example, has a long-term average annual return of about 10%, enough to double your money roughly every seven years. And though the stock market has a reputation for volatility, the S&P 500 has never lost money over any 20-year rolling period. But even with these admirable statistics, investing in the stock market isn’t for everyone.
Whether you can’t handle the day-to-day swings in the market, are susceptible to overtrading or simply don’t want to own stocks, there are plenty of alternate options available that can help you build a retirement nest egg. Many of these options carry just as much risk, if not more, than the stock market — and may not have as predictable long-term returns.
Here are some of the most popular alternatives to investing in the stock market if you’re looking to save for retirement.
Rental Real Estate
Owning rental real estate in desirable areas can provide a lifelong income stream that typically rises over time, helping combat inflation. The key to succeeding with rental properties is to ensure that you can generate enough rent to pay all of your expenses, from your mortgage and property taxes to HOA fees and maintenance costs, and still provide you with a profit. One of the major benefits of owning rental real estate is that you’re entitled to a boatload of tax deductions as well, reducing your net overall cost.
Real Estate for Capital Gains
Another way to profit from investing in real estate is the generation of capital gains. Whether you simply buy a primary residence and sit on it or hold a portfolio of rental properties, real estate prices tend to appreciate over time, particularly in attractive locations. If you start early, you may be able to flip out your properties by the time you retire and pocket a tidy profit that you can use to fund your retirement.
Bonds
Bonds are generally more conservative investments than stocks, and your return will be commensurately lower. However, some investors, including Dave Ramsey, feel more comfortable owning high-rated bonds that guarantee the return on principal at maturity while paying a handsome interest rate. While you might only earn 4% to 6% on a high-quality bond, for example, the safety of your principal might be worth it when it comes to your retirement savings.
Fixed Annuities
Fixed annuities are insurance company contracts that pay a guaranteed interest rate over a specified period of time. In some cases, this income is guaranteed for life, which makes them a conservative choice for retirees who don’t want to outlive their income.
Precious Metals
Precious metals have long been prized as a store of value and a hedge against inflation. They’re a good choice for retirees looking to diversify their portfolios, as their prices are not directly correlated to the stock or bond markets. However, many financial experts caution against putting too much of your retirement money into precious metals, as they pay no interest or dividends, carry no guarantees as to their value, and can be quite volatile.
Collectibles
Many wealthy investors diversify their portfolios by owning a variety of collectibles, from fine art to classic cars, high-end wine, coins or baseball cards. While many of these markets have performed well over time, they carry many of the same drawbacks as precious metals. Specifically, collectibles don’t pay dividends or interest, their prices can be volatile, and their valuation is often tied to emotion. However, if you’re an expert in a particular field, you might have an edge when it comes to picking the right investments.
Cryptocurrency
Some of the most famous billionaire investors in the world, from Warren Buffett to Jim Rogers, have come out against crypto, with Buffett calling it “probably rat poison squared” in 2018, according to CNBC, and Rogers recently saying it will all fall to zero. But others believe cryptocurrency, particularly Bitcoin, will succeed spectacularly in the long run — and it’s hard to argue with its track record thus far.
While extraordinarily volatile, Bitcoin has posted a staggering average annual return of 105.1% since its inception in 2009. Still, most experts, including those at Charles Schwab, suggest crypto isn’t an appropriate investment for a large part of a retiree’s portfolio, as its volatility and the chance that it could fall and never come back are just too risky for someone looking to fund their retirement.
More From GOBankingRates
