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5 Best Investments for Retirement Planning

The new era of retirement planning welcomes the baby boomers as the first generation with a burden of saving a major chunk of the retirement income in the last 20 to 30 years. This has happened because there is a significant amount of reduction in company pensions. The trend is shifting toward employers and workers. The increase in life expectancy by 20% since the year 1950 is another factor.

With the possibility of future investment in an environment where inflation stays low and interest rates increase resulting in slow economic growth, healthcare not covered in insurance and uncertainties associated with Medicare and Social Security dictates people to work as long as possible. It allows them to accelerate their savings in the later years and seek maximum returns from their portfolios.

Different Investment Options for Retirement Planning

There are numerous investment options available for you to explore. We have developed a list of top 5 investments. This list doesn’t include commodities like collectibles or gold.

Private company investments can be lucrative too but we haven’t included them. You have to be aware of the fact that they might not have disclosed the investment clearly. These companies also bear more risk than public companies.


These contracts take place between a policyholder and an insurance company. The company guarantees a variable or specific return against the capital. The company makes payments to the policyholder or his/her beneficiaries for a specific period of time.

The payment starts immediately when the policyholder makes the purchase or sometimes it is paid in the future e.g. after the retirement of even later.

These annuities offer growth to your principal amount that is non-taxable until the distribution begins. The distributions combine the returned capital, which is non-taxable and the growth, which is taxable. In a variable annuity, the policyholder can choose specific investments either at purchase or before the distributions.

Exchange-Traded Funds (ETFs)

These are the asset portfolios designed parallel to a bond index or a stock movement like the Nasdaq 100 Index or S&P 500. You can trade ETFs just like the stocks but the former has an extra benefit of inbuilt diversification.

Moreover, you don’t have to manage ETFs actively apart from aligning the performance of the fund with the index. You can purchase an ETF from any broker including Zacks trade or Ally Invest. The administrative cost of an ETF is very low. It is almost a quarter of the administrative cost for any portfolio that you can actively manage.

Mutual Funds

These are the portfolios of bonds and stocks that agents professionally manage on behalf of their clients. Each of these funds is geared towards accomplishing a particular investment goal. It can be for maintaining a balance between risk and growth. It can also be for increasing growth or generating income. Any other variations of these categories are also possible.

SEC registers mutual funds and the Investment Company Act 1940 regulates them. These funds have been available in the US for more than a century now. They gain popularity in the mid-1920s.

Individual Stocks

Preferred and common stocks are proportional ownership in a company. Preferred stocks are better in terms of liquidation and dividends as compared to the common stocks. The common stock owners benefit from the stock’s price increase from the paid price at purchase along with the dividends.

These stocks are bought/sold via brokerage houses and their representatives who are acting as agents for their clients. These agents receive their commissions against the services that they provide to their clients. The price of a common stock alters with the perception and expectations of its stockholders. When investors are feeling positive the stock price will increase and vice versa.

Income partnerships with REITs

REITs or real estate investment trusts are very popular among retirees. It is because of the high distribution of cash especially if you compare them to the corporate funds. REITs can own the real-estate mortgages or directly own the property, managing the collection of rents and assets. Some of them can also own a combination of these both.

REITs must distribute approximately 90% of the annual taxable income. It is the exact percentage according to the partnership documents. The owners are benefiting from the distributions and increase in real estate value. But the owners must understand the fact that the distribution each year is the return on the capital. And it results from the depreciation of their capital!


For most people, building as well as maintaining adequate income consistently as a retirement planning program is a tough ask. They are doing so for assuring a worry-free and comfortable retirement. It has become even more irksome in the last few years. For this reason, there is no single investment or technique that can guarantee success in the future.

Any of the above options can be effective, stand-alone or in a combination. It all depends upon the risk portfolio of the investor. It also relies on his/her ability to monitor as well as manage the investments along with the needs for income.

As per the Investment Management Head of Research Affiliates, Chris Brightman, baby boomers need to work on a solid retirement planning. They will do more than they expected and they have to save more than what they planned. For this, they have to consume a lot more modestly than they originally thought of retirement.


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