3. in­vest smart

Albuquerque Journal - Parade - - Picks -

Plot a course for your in­vest­ments that al­lows your money to grow even as you get close to re­tire­ment. Most fi­nan­cial ad­vis­ers agree it’s best to fo­cus more on the long-term growth of your re­tire­ment as­sets rather than the gains or losses you make in any one year. To achieve that growth, you may have to take a bit more risk.

Many baby boomers and re­tirees have planned to in­vest heav­ily in bonds for a steady source of in­come, us­ing the stream of in­ter­est pay­ments that they pro­vide to cover ev­ery­day liv­ing ex­penses. But a more well-di­ver­si­fied port­fo­lio may be needed. Add div­i­dend-pay­ing stocks, which can pro­vide a lit­tle ex­tra cash, and real es­tate or com­modi­ties, such as gold or cur­ren­cies, to the mix.

In­vest­ing comes with risk. Some fi­nan­cial ad­vis­ers sug­gest an­nu­ities as a way to get a steady stream of in­come dur­ing re­tire­ment. An an­nu­ity is a con­tract be­tween you and an in­sur­ance com­pany that re­quires the com­pany to make pay­ments to you ei­ther right away or in the fu­ture. Just make sure you un­der­stand the terms and con­di­tions of an an­nu­ity con­tract be­fore en­ter­ing into one, be­cause they can be com­pli­cated. There may even be an an­nu­ity op­tion in your 401(k). Em­ploy­ers may of­fer de­ferred-in­come an­nu­ities in tar­get-date funds used as de­fault in­vest­ments, which means you’re au­to­mat­i­cally en­rolled in this op­tion un­less you change it, in the re­tire­ment plans they spon­sor. A tar­get-date fund in­vests more con­ser­va­tively over the years as you get closer to your re­tire­ment date. This less risky ap­proach is meant to pro­tect your money should the stock mar­ket sud­denly sell off. How­ever, it also means you might not make as much money dur­ing big ral­lies. Tar­get-date funds can be in­vested in stock and bond funds as well as an­nu­ities that be­gin pay­ments at re­tire­ment or at a later time, of­fer­ing an­other way to gen­er­ate guar­an­teed in­come and help pro­tect your sav­ings later in life.

Sharon Ep­per­son is CNBC’s se­nior per­sonal fi­nance correspondent and host of its dig­i­tal video se­ries Re­tire Well (cnbc.com/re­tirewell).

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