Want to Invest after Retirement? Here are 3 Options for Low-Risk Income

Shutterstock

Experts say the closer you get to retirement, the less risk you should take with investments, so how do you invest after retirement? Inflation is a concern, and you may need additional income. Here are three options.

Investing after retirement

The whole idea of maintaining a portfolio after retirement is to guarantee a certain annual income level, usually to supplement Social Security. And in times of high inflation, such as now, you need an investment strategy that can help absorb rising expenses.

Investors can focus on growth in younger working years and take more risks. There are adequate working years left to recover losses from failed investments.

However, there is no long cushion of working years remaining to recoup investment losses once retirement approaches. At this point, the strategy becomes putting your money and safer investments that will practically guarantee returns (although lower).

Once in retirement, most people want to stay that way and not be forced to go back to work because their savings are too low or depleted.

Therefore, the best investments during retirement are those with little to low risk.

3 options for producing income while lowering investment risk after retirement

  1. Certificates of deposit (COD)

The best way to think of a certificate of deposit (CD) is a type of savings account (that pays a much better interest than a typical bank savings account) that will hold your money for a set period in exchange for a fixed interest payment. When you purchase a CD through an FDIC-insured bank, they are guaranteed up to $250,000, which means you can get your deposit back even if the bank has financial trouble.

  1. Bonds

While bonds typically have low returns, they also provide low risk. Purchasing bonds issued by high-quality companies and held to their maturity date are a good way for providing reliable, regular income at low risk. A good strategy is to create a “bond ladder” of holding bonds at different maturities. When one is repaid, use the proceeds to buy a new longer-term bond.

  1. High-quality dividend stocks

Although stocks carry higher risk, allocating a portion of your portfolio to invest in high-quality stocks with a history of paying regular and growing dividends can provide a hedge against inflation. Being that your retirement could last thirty years, inflation must be considered, and low-return investments may not be adequate against inflation of 5% or higher.