Many people dread retirement. This is not surprising as the monthly paycheck has seized coming in. As a result, it is a good idea to consider low-interest investment opportunities that will provide good income in your golden years.
We discuss five investments that can provide a decent return for you without excessive risk.
This is an investment contract between you and an investment company. There are many types of insurance, although all of them give you a steady return at a fixed rate. You can either have fixed or variable annuity, and the return rate might be a factor of the stock market performance. The good part of an annuity is that it comes with a provision that limits your risk should the market fail.
You should, however, take note of all the charges in an annuity, as they could be pretty high. Most annuity comes with complicated details; hence, you are better off with a good knowledge of it before buying. Also, be sure of the tax liability of an annuity.
Dividend-Paying Stocks
As long as you invest with a well-established company, you get dividends on stocks that are reasonable. While they are not as safe as fixed income securities, there is potential for capital gains.
With this, you get considerable growth and income on dividend-paying stocks. Even if there is a decline in the stock market, you will be able to survive it. This is because your income is steady, even if the underlying stock price is not stable. Also, dividends paying stock do perform better in bear markets. This is because investors prefer growth to income.
There is also the chance to buy an index fund that is made up of plenty of dividend-paying stocks. Even if your priority is preserving your investment capital, a dividend-paying stock will make you have capital appreciation with a steady income stream. This is a tested way to deal with fluctuation.
These are debt securities that are given by the state, county, and the various agencies. This comes with the main advantage of being tax-free at the federal level. Living in a state where you get municipal bonds could also give you state and local tax exemption.
With a 20 years municipal bond, you will get about 0.2% higher payment compared to what is obtainable on a 30 year U.S. Treasury bond. This gives you a higher yield with a low maturity period. The tax-free benefit also makes municipal bonds better and more attractive.
The yields from this are way better than what is obtainable from money market funds and certificates of deposits. If you need longer-term security that gives a higher interest rate, notes and bonds are worth considering.
For instance, Treasury notes (U.S. government debt securities) come with a maturity period of two to ten years and gives around 3% each year. Treasury bond, with a maturity period of thirty years, gives more than 2.5%.
Also known as TIPS, Treasury inflation-protected securities is also a type of U.S. Treasury debt. They, however, stand out from other treasury security because in addition to the interest they pay, you also get extra principal as compensation for inflation.
TIPS are available in denominations as low as $100 and are available in series of 5, 10, and 30 years. Variations in the consumer price index determine the annual inflation adjustment rate. Whatever the value of the security that changes is not paid out like interest but get added to the principal value. You get a higher value on the CPI whenever the TIPS matures. With a deflation, however, the TIPS value could drop.
Since there is a provision for inflation, TIPS gives lower interest rates compared to other U.S. treasury securities. However, you get a better deal thanks to the inflation adjustment. You can buy and hold the TIPS via Treasury Direct, like other Treasury securities.
There are many investment opportunities available when you retire. We, however, recommend a series of investment assets in your portfolio. This way, you get to prepare your investment for varieties of market conditions.
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