For most people, retirement is their biggest financial goal. To get there, you\u2019ll need to make informed choices for your retirement investments \u2014 including a few income streams that can keep making money for you while you\u2019re out and about, living your dreams.<\/p>\n\n\n\n
To make that happen, you really only need 3 things:<\/p>\n\n\n\n
For that last one, Quicken has you covered. Our suite of financial tracking and planning apps<\/a> offers a variety of ways to keep tabs on your investments, loans, income streams, expenses, and much more.<\/p>\n\n\n\n For the other two, we\u2019ll cover those right here. Let\u2019s get started!<\/p>\n\n\n\n See how Quicken helps you stay on track for retirement. Investing for retirement requires a long-term approach, and the budgeting, calculating, and re-budgeting never truly stop. That\u2019s why successfully preparing to leave the workforce requires a comprehensive retirement investment strategy. <\/p>\n\n\n\n Though the journey looks a bit different for everyone, the process generally involves:<\/p>\n\n\n\n Let\u2019s take a look at how these steps impact your financial goals. <\/p>\n\n\n\n Retirement planning starts by working out how much you\u2019ll need to save by the time you retire. That depends on 2 things \u2014 how much you want to spend each month during retirement and how much you expect to bring in through a pension, Social Security, or private income streams.<\/p>\n\n\n\n You\u2019ll also want a bit of a cushion for medical expenses and long-term care.<\/p>\n\n\n\n Typically, experts say<\/a> you should expect to spend about 70-90% of what you were making before you retired. But your exact savings goal will depend on the lifestyle you want. While some retirees can thrive on $50,000 a year, others require much more. <\/p>\n\n\n\n Social Security replaces about 40% of the average person\u2019s pre-retirement paycheck. But when<\/em> you start taking benefits matters. While 67 is technically \u201cfull\u201d retirement age<\/a>, you can increase your benefits<\/a> up to 24% just by waiting until you\u2019re 70 to collect.<\/p>\n\n\n\n If you want to start playing with actual numbers, Quicken\u2019s retirement calculator<\/a> can help you explore your options. Add some retirement income in the Retirement (Optional)<\/strong> section to see how that changes the picture!<\/p>\n\n\n\n Ideally, you want to take minimal withdrawals and leave your portfolio as intact as possible \u2014 so it can keep producing income for you during retirement. A large portfolio that\u2019s heavy on income-producing assets might fund most or even all of your monthly living expenses without any need for withdrawals. <\/p>\n\n\n\n What are income-producing assets? They\u2019re investments that produce ongoing income streams, such as stocks that pay dividends, real estate you own and rent out, private business income, and so on.<\/p>\n\n\n\n If your retirement plan is light on income-producing assets, you\u2019ll probably need to withdraw from your retirement accounts or sell a few securities along the way. <\/p>\n\n\n\n There are also rules that require<\/em> annual withdrawals at given percentages from certain retirement accounts, including your 401(k), 403(b), 457(b), and traditional IRA accounts. Why? Because you put off paying taxes on that money for years<\/em> \u2014 those withdrawals are when the government finally gets some tax income. So even if you don\u2019t need it, you have to take it and calculate it into your taxable income.<\/p>\n\n\n\n The rules for Roth accounts are different, which follows the same logic \u2014 you paid taxes on that money before<\/em> you contributed it to the account, so the government already got its due. Be sure to look up the rules for any retirement accounts you own or talk with your financial advisor so you know how they work. <\/p>\n\n\n\n Bottom line:<\/strong> if you need to withdraw from your retirement accounts or investments to meet your monthly living expenses, take your required minimum distributions (RMDs) first. Then make up any remaining difference in whatever way works best for your taxes.<\/p>\n\n\n\n You should never invest all of your money into one investment, and retirement is no exception. Diversification \u2013 investing in a variety of assets \u2013 exposes you to more opportunities for upside while evening out the risk. <\/p>\n\n\n\n Most well-diversified portfolios<\/a> build a foundation on stocks, bonds, index funds, and mutual funds. Some investors take this a step further with \u201calternative assets\u201d like real estate or commodities. <\/p>\n\n\n\n Because real estate values tend to rise with inflation, and because real estate is an income-producing asset if you rent out your properties, this is a popular investment for many retirees. <\/p>\n\n\n\n When it comes to retirement (or really any investing), it\u2019s important to consider risk and reward based on your age and goals.<\/p>\n\n\n\n Historically, higher risk correlates with bigger swings in your portfolio \u2014 with the potential for huge wins and disastrous losses. While it\u2019s tempting to chase returns, high-risk assets can spark terrible declines when the market crashes. <\/p>\n\n\n\n As a general rule, the more time or money you have, the more you can afford to risk. If your accounts plummet when you\u2019re 27, you still have plenty of time to rebuild. Similarly, if you already have a lot more than you need to retire, you might decide to invest some of that extra cushion into riskier ventures.<\/p>\n\n\n\n However, if you\u2019re approaching retirement age and you need every dime you have, that\u2019s not a good time to take big risks in the market. The list of investments below is a good starting point for getting to know some of the more popular retirement investment options.<\/p>\n\n\n\n Generally speaking, a good retirement strategy includes a strong mix of tax-advantaged retirement accounts and diversified investments. <\/p>\n\n\n\n 401(k)s are tax-advantaged retirement plans sponsored by employers. You contribute money from your paycheck into either a traditional or Roth account, then enjoy tax-deferred or tax-free withdrawals in retirement. Some companies even offer an employer match \u2014 typically 2\u20135% of your salary \u2014 to supercharge your savings. <\/p>\n\n\n\n Pros of 401(k)s<\/p>\n\n\n\n Cons of 401(k)s<\/p>\n\n\n\n Individual retirement accounts (IRAs) are tax-advantaged accounts that also come in 2 varieties \u2014 traditional and Roth. <\/p>\n\n\n\n Traditional IRAs<\/strong><\/p>\n\n\n\n People often choose these accounts if they expect their taxable income to be lower during retirement than it is today. That\u2019s because traditional IRAs lower your tax burden now<\/em>. The money you add to a traditional IRA this year is subtracted from your income this year \u2014 it looks like you made less money, so you pay less in taxes. You do pay taxes eventually, though, when you withdraw from the account during your retirement. <\/p>\n\n\n\n Roth IRAs<\/strong><\/p>\n\n\n\n People often choose these accounts if they expect their taxable income to be the same or higher during retirement than it is today. Roth IRAs accept after-tax contributions, which means you don\u2019t get any write-offs for them this year. However, your qualified withdrawals during retirement are tax-free \u2014 you don\u2019t even pay taxes on the value your account gained over the years. Plus, you aren\u2019t usually required to make withdrawals from a Roth IRA during retirement like you are with a traditional IRA. <\/p>\n\n\n\n Pros of IRAs<\/p>\n\n\n\n Cons of IRAs<\/p>\n\n\n\n Annuities can supplement your retirement income. In short, you contract with an insurance company to pay them a lump sum today or to make regular payments over time. Then, the insurance company repays you \u2014 plus interest \u2014 in the future. <\/p>\n\n\n\n Pros of annuities<\/p>\n\n\n\n Cons of annuities<\/p>\n\n\n\n Bonds are essentially loans you make to the government or to a business that they repay over time with interest. Depending on the bond, you may receive regular interest payments for a certain number of years and then get the loaned amount back at maturity. Other bonds pay your principal plus interest in a lump sum upon maturity. <\/p>\n\n\n\n Pros<\/p>\n\n\n\n Cons<\/p>\n\n\n\n See how Quicken helps you track your investments. <\/p>\n\n\n\n Stocks represent ownership in a company. Taken as a whole, they have historically offered positive performance when measured over time. Some stocks are riskier than others, and the stock market as a whole may drop for weeks or months at a time. Still, the S&P 500 equity index has averaged around 10% over the long run.<\/p>\n\n\n\n Pros<\/p>\n\n\n\n Cons<\/p>\n\n\n\n Index funds are passively managed \u201cbaskets\u201d of securities that aim to track a market benchmark like the S&P 500 or the Dow. Each fund contains dozens to hundreds of securities, providing instant diversification without doing hours of research. <\/p>\n\n\n\n Pros<\/p>\n\n\n\n Cons<\/p>\n\n\n\n Mutual funds pool money from multiple investors to invest in a basket of assets (typically stocks and\/or bonds). Each fund issues shares that trade once daily at a set price, called the net asset value (NAV). Passively managed funds follow a benchmark index, while actively managed funds employ a manager to make trading decisions.<\/p>\n\n\n\n Pros<\/p>\n\n\n\n Cons<\/p>\n\n\n\n Holding real estate provides a chance to diversify your portfolio while generating income. Some investors prefer to purchase rental properties or even to rent out part of their primary residence. Others flip houses and profit from price appreciation and the fruits of their physical labor. <\/p>\n\n\n\n Pros<\/p>\n\n\n\n Cons<\/p>\n\n\n\n Real estate investment trusts (REITs) cut out the hard work of real estate investing. REITs purchase and manage properties, mortgages, or both, generating profits by collecting rent and\/or servicing loans. These trusts then issue shares on stock exchanges and pay the bulk of their profits to their investors.<\/p>\n\n\n\n Pros<\/p>\n\n\n\n Cons<\/p>\n\n\n\n The investments included here may be popular for retirement strategies, but they still come with risk \u2014 past performance never guarantees future results. So be sure to keep your personal risk tolerance, retirement timeline, and goals in mind as you research your options.<\/p>\n\n\n\n In creating your strategy, it\u2019s also extremely important to plan on enjoying<\/em> your retirement. If the numbers aren\u2019t working, don\u2019t go straight to cutting your budget. Think about what you could do to expand your opportunities. <\/p>\n\n\n\n Could you keep some hobby income or even a small LLC going on the side doing something you love? Not only does it offer the possibility of additional income, it also makes the money you spend on that hobby (or that LLC) tax deductible!<\/p>\n\n\n\n To do that of course, you\u2019ll need to track your income and expenses so you can claim those deductions each year. If that feels like a challenge, our suite of financial tracking and planning apps<\/a> offers uniquely customizable categories, tags, and reports that make it easy to track anything you need to \u2014 so you can manage your business and household finances all in one place.<\/p>\n\n\n\n
\n Continue \u2192<\/a><\/p>\n<\/div>\n\n\n\nRetirement investment strategy<\/h2>\n\n\n\n
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Figuring out how much you\u2019ll need to save for retirement<\/h3>\n\n\n\n
Choosing a tax-advantaged withdrawal strategy<\/h3>\n\n\n\n
Diversifying your portfolio<\/h3>\n\n\n\n
Balancing profits with financial security<\/h3>\n\n\n\n
The best retirement investments<\/h2>\n\n\n\n
1. 401(k)s<\/h3>\n\n\n\n
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2. IRAs<\/h3>\n\n\n\n
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3. Annuities<\/h3>\n\n\n\n
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4. Bonds<\/h3>\n\n\n\n
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\n Continue \u2192<\/a><\/p>\n<\/div>\n\n\n\n5. Stocks<\/h3>\n\n\n\n
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6. Index funds<\/h3>\n\n\n\n
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7. Mutual funds<\/h3>\n\n\n\n
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8. Personally held real estate<\/h3>\n\n\n\n
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9. REITs<\/h3>\n\n\n\n
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Final thoughts<\/h2>\n\n\n\n