What is the safest investment for retirees?
No investment is completely safe, but Treasury securities, bank savings accounts, CDs, money market accounts, and fixed annuities are considered the safest investments you can hold. Bank savings accounts and CDs are generally FDIC-insured, and Treasury securities are government-backed notes.
Money market accounts are considered low-risk, and fixed pensions typically include guarantees. Annuities are insurance contracts and have some protection if the insurance company fails. The main purpose of these investments is to protect your principal. The second purpose is to supply interest to the income. You will not get high returns from these options, but you won’t experience losses either.
• Learn What Safe Means
You are exposed to three kinds of risk with safe investments: the possibility of losing principal, loss of purchasing power because of inflation, and the threat that comes with illiquidity, which can happen when safe investments include surrender charges or maturity dates are a long way off. If you keep all your money in safe places, you may discover that it won’t buy the same amount of goods and services.
This is because it hasn’t earned interest and kept up with inflation. Your money may not have lost principal, but it will lose purchasing power if it is too secure. You’ll also need some funds invested in growth for the long term. Safe investments are defined by what you want to achieve, your risk tolerance, how much capital you have, and how much time you have to keep investing.
• Determine How Much to Keep in Safe Investments
It’s wise to at least keep three to six months of living costs in safe investments as your emergency fund. The less assured your employment, the more money you need to keep tucked away safely. And the closer you are to retirement, the more money you must keep in low-risk investments that are not risky. As you get close to retirement, make a retirement income prediction, and use it to decide how much to keep in safe investments.
An economic advisor can help you develop a prediction, and you can use it to determine how much you must withdraw and when. You can then match your secure investments with your cash flow requirements, ensuring your withdrawals are supported by safe choices.