Planning for your retirement begins by calculating the minimum ROI you need to finance your lifestyle goals after you stop working. This should direct your investment plan. Investing as a senior is a tricky business. It’s a choice between aiming for high returns from the best stocks with the risk of serious loss and accepting painfully low-interest rates from safe investment avenues.
When you are no longer working, you cannot afford to lose all your money. It is always best to have a safe and guaranteed income source such as an annuity or pension. Stocks are generally quite volatile so owning stocks in retirement is not always a good idea. If you have to invest in stocks in retirement, a diversified portfolio of stock index funds is your safest bet.
Pros and cons
Investing in stocks is a great strategy to grow your wealth and stay ahead of inflation. They are more likely than other investments to produce high returns in the long run. With our lifespan getting increasingly longer, even retirees need to continue growing their assets. However, in spite of their high return on investment, investing in stocks is a risky venture due to their volatility. If you suffered the misfortune of retiring and investing in stocks at a time of below-average market returns, you would have to sell at a loss ruining your retirement goals. If you decided to weather the downturns in the stock market instead of selling, the emotional stress alone could be bad for your overall wellbeing.
If you can afford to weather bad market conditions and not sell at a low point, bear markets should not worry you. Prices always rise after a fall.
Owning stocks in retirement
After you have set aside enough to secure your lifestyle goals in retirement and you still have money to spare, you can afford to take the risk of investing in stocks. However, even if you can afford the risk, you need to understand the consequences of the risk materializing. To avoid selling when the market is down and if you do not have liquid cash stashed away, you risk being forced to cut down your spending.
If you choose to buy stocks with your retirement funds, you should not need to sell and use that money in the next five years. Invest in stocks only if you have the flexibility to weather the downturns in the stock markets without selling.
If you buy stocks in retirement and need them to perform so that you can achieve your retirement goals, then you did not plan for your retirement. Investments in stocks should only yield extra income to improve your retirement experience.
If you want to enjoy low-stress and low-return investments in your golden days, you should start saving early. With enough money to finance your retirement plans, you will not need the stock market. With the free time and extra money, you can trade in stocks for profitable fun after retirement. Prowling Stock message boards and news platforms can be an excellent way to pass the time since you are no longer reporting to work.