How to Invest Money for Seniors

Last Updated on April 25, 2024 by Rachel

At a young age many people are energetic enough to work and earn a reasonable income to take care of themselves. But as you grow older, you may need to put in place investments that can earn you a reasonable income without having to put in a lot of energy and time into it.

According to Statista’s analysis the number of retired seniors receiving Social Security benefits was 48.5 million in 2022, an increase of 14 million over the past decade. The National Council On Aging (NCOA) has reported an increase in poverty levels among seniors 65 and above from 8.9% in 2020 to 10.3% in 2021. This increase has seen one million more adults depending on government retirement assistance in 2021 compared to 2020.

The increase in poverty levels and a higher number of dependents on scarce government resources has created the need for seniors to find additional income sources to help them cover the cost of living and cost of care. With this in mind, let’s look at why you should invest, what to pay attention to when investing and which investments are low risk for you, but guarantee good returns.

What Are the Benefits of Investing as A Retiree?

Investing after retirement ensures you have enough money to take care of yourself despite no longer having guaranteed income from full time employment. You can build up wealth that can take care of both you and your family’s needs. Here are reasons why you should investment as a senior:

Financial Freedom to Take Care of Family

Family is one of the major driving forces to the early mornings and late nights at work so we can enough to take care of our loved ones. As a senior, you may have kids and grandkids who look up to you for advice and different types of assistance. Growing your retirement fund will enable you offer a helping hand towards your grandchildren’s  education or health funds, thus investing in their future. Isn’t that lovely!

Business Capital

Maybe you were passionate about something in your youthful years but lacked the time or the funding to pursue it. Low-risk investments provide you with funding to turn your dream or passion into a paying business. Moreover, after retirement, you have enough time on your hands to be present in running your business. So why not?

Building Your Retirement Funds

You may be receiving Social Security Income after you retire but it may not be enough to take care of all your bills and expenses. A study by Schroder’s reported that seniors above 55 believed that they will need 74% of their income to be comfortable after retirement, yet seniors receive approximately 61% of their final salary per year after retirement. The good news is 4 in 5 retirees from this study showed contentment in their retirement salary. However, 59% were of the idea of investing to increase their retirement income.

Most retirees are shocked when they realize that the living costs in retirement are higher than they had anticipated. Having an extra income source will ensure some money is left for fun and recreation after taking care of your basic needs.

Purchasing Your Dream House

You may have wanted to retire to the suburbs, in a beautiful home with a backyard, and a front porch where you can sit and watch the sun set while sipping tea or crocheting a scarf for one of your grand kids. With enough income from a good investment, you can have that. Rent out your home in the city to also increase your retirement funds when you downsize to your retirement home.

What Should Retirees Pay Attention to When Investing?

Diversified Investment Portfolio

Instead of putting all your eggs in one basket, consider combining several safe investment options instead of relying on one investment for your income. Diversification minimizes loses and makes market fluctuations bearable when the market is volatile reducing the hit on your investment portfolio.

Risk Appetite

Risk appetite refers to the amount of risk you can take in your investment to get your desired returns. Do not invest above your risk appetite for your peace of mind. If you have a low risk appetite, the invest in lower risk investment that offer you decent returns.

Research

Do your homework before putting your money into any investment no matter the potential of returns it offers. Go online or get a financial coach who can shed some light on the market of your investment.

FDIC Insured Accounts

Federal Deposit Insurance Corporation (FDIC) insures investments and saving accounts for retirement income. You can get some relief knowing that the federal government is protecting your deposits.

4 Low-Risk, High Return Investments for Seniors

When investing safety is the number one priority. Whatever you choose to invest in, ensure it can withstand market volatility and inflation. In addition, choose an idea that is low risk even though high-risk investments can produce high returns. You don’t want to run out of money, yet you depend on the said investment portfolio to supplement your Social Security Benefits.

High Yield Saving Accounts

On a high yield saving account, you will earn a higher interest rate compared to normal saving accounts. You can open your account with a bank or credit union. What you need to start earning from a high yield saving account is a minimum opening deposit and a higher minimum balance. Furthermore, the FIDC insurance amount is $250,000 per deposit.

How do you earn interest in your high yield saving account? A higher interest rate is earned from your deposits and compounded over time to increase your earnings. You can also get mobile banking services on these accounts making them convenient for seniors who are immobile.

Certificates of Deposits

This refers to a deposit account you can earn fixed interests from after a set period of time. For a CD, you pick a lock-up rate, which is the period before you can redeem your deposits, when you will earn interest annually. CDs are also insured by FDIC, and in 2022 they reported better returns than money market accounts and traditional accounts.

Check the CDs database to learn all you need to know on this investment and to reduce the risks of falling victim to fraud. Grow your CD ladder with different lock-up rate for a steady cash flow.

Fixed Annuities

For a specific period of time, you will receive a guaranteed interest from the insurance contract you have put in place, that is the fixed annuity. These are insurance products, not investment products so the risk of losing your money is low.

You can buy fixed annuities by paying lump some or through a series of deposits, and the insurance company will earn a specific interest rate over a specific time. You will be charged a fee if you withdraw funds before the accumulation phase is over. A renewal rate will be set after the end of the initial annuity rate. One drawback of this investment is the lack of liquidity. However, you are guaranteed returns at low risks.

Treasury Bills and Bonds

This is one of the safest investment option because they are backed by the USA government. Treasury bonds, bills, notes and Treasury inflation-protected securities (TIPS) are a good short-term investment option. Interest is paid every six months over a period of 5 or 10 years, with treasury bonds paying for up to 30 years.

Individual treasury bonds are not FDIC insured, but since you’re investing in the government, the risks of losing your money are low. Bonds offer you guaranteed steady income at low risks making them a good investment for retirees.

Final Thoughts

These are not the only safe and secure investment plans for seniors but they are a good place to start. Reach out to a financial advisor when nearing retirement or after retirement to learn the investment ropes. Remember, invest within your risk appetite for peace of mind!