The 10 best low-risk income sources for a safer retirement in this article will be beneficial to you if you are planning for retirement.
When you are planning for retirement, you’ll want to generate enough money to sustain yourself after you leave the workforce.
However, many people do not want to expose their money to many risks because of the fear of losing it. That’s why low-risk income sources are a good option for safer retirement.
10 Best Low-Risk Income Sources for a Safer Retirement
When it comes to retirement planning, you need to take extra care. You have to ensure that your money is in a safe place so that you’ll have peace of mind. Keeping your money in safe places will also enable you to have a secure and comfortable retirement.
Below, you will find the 10 best low-risk investments for a safer retirement
Bonds are a low-risk income source that you can consider if you want to invest your retirement funds. They signify debt. Hence, if you buy bonds, it means that the issuer owes you and you will be paid interest on the debt.
Bonds especially those issued by the government and its agencies, and high-performing corporations are also a dependable source of retirement income.
Unlike bonds, stocks signify a share of ownership in a company. Companies that offer these stocks pay dividends to shareholders. Furthermore, these dividends are paid in the form of cash based on specific schedules like quarterly or every six months.
Dividends provide retirees with income. However, the risk in dividends is that they could stop if the company encounters a financial setback. Usually, the best dividend-paying stocks are offered by companies that have massive market capitalization.
An annuity is a contract made with an insurance provider whereby you’ll pay a certain amount of money to them in exchange for monthly checks for a while or the rest of your life.
Fixed annuities are another reliable source of retirement income as they provide guaranteed income for investors. They also offer tax-deferred growth. This means that you won’t pay taxes on your money until you receive your payout after retirement.
Real Estate Investment Trusts (REITs)
A real estate investment trust (REIT) is a company that owns and operates income-producing real estate. They lease houses, collect rent and distribute income in form of dividends to shareholders.
When you invest in a REIT company, they’ll pay you a share of the income that they generate. Furthermore, as rental income tends to be regular, you could earn monthly or quarterly from REITs.
Savings accounts are a safe place to keep your retirement money. They are considered safe because they are FDIC-insured. Hence, when your bank becomes bankrupt, you’re guaranteed that your savings are covered by the federal government.
Also, while your money is in a savings account, an interest rate will be paid to grow your funds. In addition to this, savings accounts also allow you immediate access to your funds when you need them.
Certificates of Deposits (CDs)
Certificates of the deposit are another good low-risk income source to invest your retirement funds. CDs offer more interest rates than the usual savings accounts. When you invest your money in CDs, it will be locked up in high-yield savings account for a defined time frame. While your money stays in the account, an interest rate will be paid on the money.
However, you cannot withdraw your money from CDs before the specified time frame. If you do, you’ll pay a penalty fee. Certificates of deposits could be the best option for you if you have some time horizon before retirement.
Preferred stocks have a lower market risk when compared to common stocks. In addition to this, they also possess high-interest rates like bonds. This is because they pay dividends more consistently. You can either purchase preferred stocks directly from companies, from an online broker, or a financial advisor.
Money Market Accounts
Money market accounts operate like savings accounts. You’ll put your money in them and then earn interest on them. This interest rate depends on how well the money market investments perform.
However, they are considered low-risk investments because they are tied to safe investments. You can open them in a bank or through a credit union.
Money Market Funds
Money market funds are mutual funds that you can buy from brokerages, companies, and financial services firms. These funds are pooled from several investors and invests in short-term debt securities like bonds and treasuries.
Money market funds are easily liquefied and are considered safe because they too are tied to secure investments.
Treasuries are of three forms; treasury bills, bonds, and notes. When you buy treasuries, you are lending to the US Treasury. The money will be paid back to you with interest at a later date.
Treasuries are safe because they are backed in full faith and credit by the US government. This investment offers a decent interest rate and you have the guarantee that you’ll get your money back in full.
What Investments are Best for a Retiree?
For some people, retirement is not a time to enjoy a lifetime of working hard. Hence, they prefer to invest to have an additional source of income to supplement their pension payments and social security. Some good investments for those who have retired are market accounts, treasury bills, and annuities. These investments guarantee regular income and are also low-risk.
What are the Sources of Retirement Income?
There are several sources of retirement income. Some of them include guaranteed income, pension plans, Individual Retirement Accounts (IRA), 401(k),
What are the 7 Best Sources of Income?
The best sources of income streams include
- Active and passive income streams.
- She earned income.
- Profit income.
- Interest income.
- Dividend income.
- Rental income.
- Capital gains income.
- Royalty income.
Where Can I Put My Money to Earn the Most Interest?
Below are some places that you can put your money to maximize your interest earnings
- High-yield savings accounts.
- Treasury bills.
- Money market accounts.
- Certificate of Deposits (CDs).
- High-yield checking account.
What is the Safest Place to Put Money?
The safest places to put your money are in low-risk investments and savings accounts that guarantee growth. Some of these include fixed annuities, CDs, corporate bonds, savings accounts, money market accounts, and government bonds.
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