According to the Investment Company Institute, as of September 2023, Americans held a total of $35.7 trillion in retirement assets. More than 60% of those funds were held in IRAs and defined contribution plans, such as 401(k)s. Private- and public-sector benefits plans and annuity reserves made up most of the rest.
While many people work hard through the years to save up for retirement — investing earlier in life for that purpose — some people still continue to invest during retirement. Here's a brief look at some risks, rewards and information to consider if you want to invest more during your retirement.
Technically, if you have a retirement fund, it's probably invested somewhere. However, we're talking more about taking your here-and-now income and investing it into opportunities to make more money.
Some examples of investment opportunities individuals in retirement might consider include rental properties, stocks and bonds or even businesses. Every investment comes with some type of risk, and for seniors, those risks are a bit different than they are for younger investors. Here are a few things to consider if you want to invest during retirement:
Of course, there are some potential advantages of investments later in life. They can add to your retirement savings or income, helping to fund the vibrant lifestyle you want to live. Taking the time to learn about and work on investments can also help you stay focused on goals and feel productive, which can reduce some of the potential challenges many people face during retirement — including boredom, isolation or even cognitive decline related to not using the mind anymore.
If you do decide that investing in retirement is right for you, take the time to educate yourself, and consider working with a financial advisor who can help you maximize returns while minimizing risks. You might also consider following some of the best practices below.
Know how much you need each month and year to cover your basic needs, such as housing, clothing, food and other necessities. Be realistic when estimating health care costs, and ensure you account for unplanned medical issues or emergencies.
Seniors who make the move to assisted living communities such as Bethesda Gardens in Frisco may find this step easier than others. Many of their expenses are streamlined by their living arrangements.
Once you have an estimate of how much you need to live every year, multiply that by how many years of retirement you're hoping to cover. Consider whether you have extra income or funds you can invest while leaving much of your retirement covered.
If you know you'll balk the second the market looks a bit weak, the stock market may not be the right option for you. If you invest above your individual risk tolerance, you may find yourself making emotional decisions about investments, which can lead to drastic measures that end up costing you money.
If you have a low risk tolerance, it doesn't mean you can't invest. You may want to stick to safer options such as annuities or CDs, though.
Moving money around in retirement can come with some pretty big tax implications, so definitely talk to a professional who can help you understand what you might owe. You can also work with a financial advisor to learn about options that can reduce tax burdens as you invest.
Real estate might sound like a good idea, for example, but putting all your retirement savings into rental properties may not be a good idea. Balance your portfolio between various types of investments to mitigate risks if the markets change and ensure you have some assets that convert easily to cash if you need them.
