Investments for Seniors

Making the right investments will make it possible for you to have a steady income that you can depend on in retirement. Some of the best investments for seniors are ones that are fixed-income. Establishing a diversified portfolio of bonds, money market funds, certificate of deposits are a good start for those who want to earn dividends for long term gains from investments that pay interest.

The interesting thing about bonds is that when bond prices go up, usually interest rates go down. Many seniors are choosing to get fixed income security so that their investment provides a return of fixed periodic payments usually monthly. The benefit of this type of investment is the eventual return of principle at maturity.

The comparison between a variable income security would be that the payments could change because of being influenced by short term interest rates where as with a fixed income security payments are known in advance. Generally, fixed income investments offer a lower return on investment because they guarantee income.

Is Interest Only The Best Investment?

Most retirement income plans for investors are interest only, how it works is that you need all of the principle to create income to avoid a declining principal balance and declining income. For those with excess capital meaning they can live on less you w8ll need to divide the amount you will need to live on against the amount you are able to invest, in order to get the correct picture of your cash flow requirement.

For example if you know you need $35,000 per4 year and you have $600,000 to invest, then divide $35,000 by that number to get the percentage of your cash flow requirement. Next you will want to plan for emergencies and irregular expenses that will come up and consider if you will need to pay any taxes.

The yield on a fixed income security may be low so to boost your average yield you can look at other bond types. Some of those would include: agency, corporate, or foreign bonds, beware of risks and price fluctuations that may occur at the time of sell. It is recommended to buy bonds with varying maturities, by laddering you are able to avoid some of the risks involved.

What Is a Bond?

It is important to note that a bond is simply a promise to pay interest on borrowed money, the issuer is the company who borrows an amount of money to issue the bond and pays the interest. The principal of a bond or maturity value, is the amount that the issuer borrows which must be repaid to the lender. The coupon is the interest that the issuer must pay. The maturity is the date that the issuer must return the principal. The indenture is the contract that states all of the terms of the bond.

Other options for seniors when it comes to investing include:

Mutual Funds and Interest Only

Deferred Annuities

Be inquisitive ask lots of questions and be thorough figuring out the numbers in your interest-only portfolios. It is recommended that work out the details, so you do not find yourself without adequate retirement funds.

H.R. 3551: Senior Investment Protection Act of 2009

To protect older Americans from misleading and fraudulent marketing practices, with the goal of increasing retirement security.