How Should I Invest for Retirement?

The questions of how an individual should invest for retirement are almost endless; however, there are some tried-and-true methods that have worked for people for generations. Below are just a few of the top tips for how to invest for retirement, no matter your current financial situation.

Long-Term Assets

First, you must learn to invest in long-term assets that have interest-bearing capabilities. Tax-deferred assets such as annuities, individual retirement accounts, 401k accounts, and long-term certificates of deposit give you two ways to increase your net worth. These are tax-deferred. You do not have to pay taxes on them until you actually take the money out as a cash dividend. Because you will likely be earning less money when you are retired than when you are working, you will almost certainly end up paying fewer taxes on these dividends.

The interest on these accounts will be able to grow tax-free. This will provide you with an additional wall between your purchasing power and inflation, which is constantly grating on the ability of your cash flow to create the life that you want for yourself and for your family.

Short-Term Assets

Second, learn to invest your current cash flow for short-term assets that can be sold for more money later. Although the stock market can be quite hazardous if you play it like the lottery, blue-chip investments that have steady dividends are often used as a supplement for retirement income by savvy individuals. These securities are well known to hold their purchasing power even in recessions, and the steady dividend will help to balance out the losses in the short term that might come during a dip in the overall stock market.

Real Estate Holdings

Third, take a look at real estate both as an investment and as a quality of life issue. In order to save money for retirement, moving to a less expensive area is a common tactic. However, you should not look at a piece of real estate based on money alone. Depending on the amount of time that you have, you should monitor the market over time so that you can get the absolute best deal. Do not try to time the markets like a short term prospector would; simply make your purchase during periods of long downswings so that you can gain instant equity in your investment without having to sell off or leverage any of your other assets.

Your real estate holdings also have value as a potential reverse mortgage. A reverse mortgage is an option for retired seniors that borrows on the equity of your home to provide monthly payments that can be used to supplement your income.