Calculating Risk and Investing Wisely

Investment Options for Your Retirement Planning

Seasoned investors know that determining asset allocation is critical to an investment strategy. Diversifying your portfolio between stocks, bonds, and cash takes into consideration your need to take risk and your tolerance for doing so.

It’s important to understand how to invest if you want to maximize the possibility of achieving your retirement goals. To help you get started, this article will provide important information you should consider as you start the journey of planning for your retirement.

What are Some Investments for Retirement You Should Consider?

Choosing the right investments for retirement can be a bit of a minefield, but here are some suggestions for you to consider.

  • Index Funds

An index fund is a mutual or exchange-traded fund (ETF) that tracks or mimics the components of a financial market index such as the Standard & Poor’s 500 Index (S&P 500). 

Index funds are considered ideal investments for retirement accounts for many reasons. They track a designated index, so you will always capture the returns of the index, minus the cost of the funds.

They are generally more tax efficient that actively managed mutual funds. Index funds distribute less capitals gains because the portfolio doesn’t turnover as much as most actively managed funds.
The management fees charged by index funds (called “expense ratios”) are generally lower than those levied by actively managed funds.  Higher fees are one reason why actively managed funds frequently underperform comparable, lower-cost index funds.

  • Life Insurance

Life insurance is a legally binding contract between an insurer and a policy owner. There are many different kinds of life insurance but the underlying principle is the same: In exchange for premium payments made by the insured, the insurer pay a death benefit to beneficiaries named in the policy.

Life insurance offers many other benefits to both retiree and their loved ones. It replaces the policy owner’s lost income and benefits when they pass away, ensuring that their dependents still receive financial support. It also helps dependents pay off the remaining debts and mortgages of the policy owner. Overall, adequate life insurance provides dependents peace of mind.

Life insurance is a complex subject, with many options. Before making a commitment to a particular policy, it’s prudent to consult with an insurance professional who can explain the pros and cons of different types of insurance.

Protection Against Longevity Risk

“Longevity risk” refers to the risk of outliving your money.  One option to mitigate this risk is to purchase a type of insurance (called an “annuity”) that is designed to protect you from outliving your money.

Like other forms of insurance, the decision to purchase an annuity is a complicated one.  Issues you will have to consider include (i) when to purchase an annuity and (ii) what type of annuity you should consider.

On the timing issue, many experts believe you should wait until your mid-seventies or even later before you buy an annuity.

There are two basic types of annuities you should consider for longevity protection. Immediate and deferred annuities.

There are many other issues relating to annuities including whether you should use taxable or tax-deferred accounts to pay for your annuity.

A competent RIA can guide you through the annuity maze and give you peace of mind that comes from knowing you have taken reasonable steps to protect against longevity risk.

Start Investing for Your Retirement

These tips can help you get a head start on planning for, and saving for retirement..

At Daner Wealth, we offer retirement planning services that include integrated wealth planning, estate planning strategies, investment management, protection from longevity risk.  We work with trusted insurance professionals to assist you with your life and disability insurance needs. 

Contact us today to get started on your retirement planning journey.

Seasoned investors know that determining asset allocation is critical to an investment strategy.


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