It’s never too early to save for retirement. I honestly wish I had started as a toddler, but I was much too busy with dinosaur toys. I wish I started younger because building lasting wealth, that will still carry you comfortably in the golden years, takes time.
Retirement signifies a time of rest for a lot of people. For others it’s a time when you can finally live life on your own terms, and explore endless possibilities.
Unfortunately, there are millions of people who didn’t take action on retirement when they needed to, and their retirements are neither restful nor free because of financial concerns.
The retirement problem is bigger than you might think! In fact, not preparing for retirement is the #1 financial regret of Baby Boomers. I’m a licensed insurance agent, and I’ve worked with people on retirement finances. It gave me a first-hand viewpoint. I was stunned by how many people were in their early 60’s, hoping to retire in only 3 or 4 years, and were just beginning to think about retirement.
Don’t make this mistake! The key to saving for retirement, and building wealth, is investing your money where it will GROW! Is your money sitting in a stagnant brick-and-mortar bank account, accumulating half a percent of interest? If it is, than it’s time to expand your horizons!
Whether you’re open to a little risk, or a conservative investor, there are options for everyone. Here are the 10 best retirement investments to make as soon as possible!
1. High Yield Savings Account
For starters, one of the safest and easiest ways you can start to grow your savings is by putting it in a high yield savings account. These are usually online-only savings accounts. They don’t have all of the overhead costs that come with a brick and mortar bank, and they’re able to fold some of that extra margin into your interest rate.
While most savings accounts pay far less than 1%, many high yield savings accounts (USED TO) pay 2.2%, 2.3%, or even 2.4%! These are FDIC insured, no-risk savings accounts, and most of them have no fees.
CIT Bank (the one that I use), SoFi, Ally, and Synchrony Bank are my top picks (though I highly recommend NerdWallet’s comparisons to see ALL of your best options), with low minimum balances, and easy requirements to meet. Open one today, and make your savings actually count!
Disclaimer though: high-yield savings account’s interest rates are usually tied to the federal reserve rate, which fluctuates up and down. My CIT savings account was at 2.4% when I joined, but has dropped to 1%. It will often go up, and 1% is still better than most banks, but be prepared for some variation in interest rates. You definitely don’t want all or even most of your money sitting in a simple banking account; you’ll be missing out on TONS of compound growth.
2. Growth Stock Funds
So it’s no secret that trading stocks can be a high risk, volatile environment for investing. Growth stocks are the purest example. You try to buy them when their prices are low, and make calculated choices of companies that show positive outlook for growth. The hope is that by the time you sell you will have seen growth on your money.
Many investors do well in the markets, while others lose money.
One thing you CAN do to protect against some of this volatility is to invest in entire growth stock funds. By keeping a diverse portfolio of different stocks, across multiple industries, instead of betting the whole farm on one stock. By doing this you protect yourself against extreme loss if you have one bad pick. Diversifying like that will reduce most of your risk.
The indices, such as the S&P 500, have traditionally helped investors average growth of 10%. The opportunity for growth is strong.
Just remember these trading rules!
1. NEVER trade more than you could afford to lose.
2. Don’t chase stocks out of greed. This usually leads to buying at the wrong time.
3. Use a trailing stop loss order, to protect you against big loss. This will follow your growth, but triggers your portfolio to sell a stock if it dips to your chosen acceptable loss. This can prevent large losses, and locks in your gradual gains.
3. Dividend Paying Stocks
Dividend paying stocks offer a way to grow extra cash beyond the growth of the stock. Many companies pay out quarterly dividends to their investors every few months. This includes a lot of major companies, like Apple, Verizon, and Sirius XM.
The beauty of dividends is that you have two different ways to make money from your stock holding. You can eventually sell the stock, and take home whatever gains the stock made. You can also bring in consistent bonuses through dividends, that can grow your wealth even if your stock hasn’t grown.
The amount you make off of dividend investments will totally depend on the companies that you choose, and the amount that you invest. Regardless, it’s a strong source of passive growth.
4. Real Estate Investment Trusts (REIT’s), Peer To Peer Lending (P2P), and Alternative Investments (Yeah I know… it’s a mouthful)
One of the safer and more popular ways to grow your money is to invest as a part of a group. Peer to peer lending lets you participate in funding a number of different alternative investments along with other investors. This could be an investment in a business start up, real estate, freight/overseas ship refinancing, litigation, and a few other unique investments (<== yes, you can even buy shares of exotic collector cars now).
The returns on these kinds of investments are often very lucrative, but come with some risk, as on rare occasions a lendee may stop making payments, or the loan is otherwise defaulted.
The good news is there are a bunch of awesome resources where you can invest in vetted, carefully screened investing opportunities. This removes a lot of your risk and need for research (though you should always do your due diligence). Alternative investments like these probably offer the biggest payouts you’ll ever see on an investment, but getting into them can be difficult until you have a lot more money to invest. Even the easier ones to access, like Yield Street, require that you be an accredited investor ($1,000,000+ net worth, or $200,000/year minimum income). If your income or investments aren’t at the accredited level yet, keep this one in your back pocket for when you’re ready and consider the NEXT option below!
Fundrise is one of the most popular REITs, specializing in real estate investments. I use Fundrise myself and currently hold shares of over 50 properties all over the United States, from North Hollywood to Portland to Washington D.C. The beauty of Fundrise for me is not only that my money is growing steadily as the value of my property shares grows, but I also make dividend income on all properties that have tenants. As each rental property collects revenue from tenants I get a cut of the rent. Fundrise pays me my dividends every 3 months, and that’s in ADDITION to my money’s growth. Fundrise is one of my highest recommended investment options.
LendingClub and Yield Street are two other great resources for vetted, carefully picked investment opportunities. Yield Street, in particular, approves less than 10% of investment opportunities that it inspects, so you have the assurance of carefully chosen options.
Just be warned, many alternative investments require you to be an accredited investor (don’t worry, Fundrise is available to anyone). Which is a fancy way of saying you already have a lot of money, owning a net worth of $1,000,000 or making $200,000+ per year (which most 20 year olds don’t, am I right?).
I know, I know, you’ve probably heard mostly bad things about annuities. Part of their bad reputation is justified. Insurance agents who write annuities can make enormous commissions on them, and this has often lead agents to encourage clients to get annuities even if they aren’t a good match for an annuity.
This doesn’t mean that annuities aren’t good retirement investments for some people.
Generally, an annuity requires you to have a lump sum of money, or a savings nest egg to invest. An annuity essentially takes your nest egg, and guarantees that you will always have payouts from it until the day you die. Even if it runs out, you will be guaranteed to continue receiving payments from your annuity. Annuities, like most kinds of insurance, are all about peace of mind.
Annuities will typically pay you in monthly or quarterly chunks of income, which you can draw from just like your social security, pension, and other retirement income streams.
The catch to most annuities that you NEED to be aware of is that your money will usually be locked in for 10 years. That means that if you try to draw money back out of the annuity before the 10 years is up, you’ll incur a penalty and lose some of your money. That’s why it’s important to only put money into an annuity that you won’t need for a long time. Pretend the money is buried in a dungeon guarded by dragons until retirement.
Some of the best annuity providers are Allianz, and American Equity.
6. Robo Investing
Robo advisers are an easy way to invest some of your funds. The app that you use as your robo adviser will allocate your assets however you want, based on your preferences. You can set it to prefer certain industries, more risk, less risk, or whatever your trading preference would be.
The actual buying and trading is totally passive, and you can rely on the robo adviser’s algorithms to make good selections for you. Many robo advisers even offer tax-loss harvesting on auto-pilot. The beauty of a robo adviser is that you easily make a fortune in the market using them and you don’t have to do research or take risks based on your own conclusions.
As a beginner the best option out there is SoFi Invest! This is the one that I use, it’s completely free charging no advisory fees whatsoever, and has made me thousands of dollars. In fact, my account has consistently seen 18%-24% growth this past week, and solid gains the entire time I’ve used SoFi. It’s my #1 recommendation for the majority of your stock investments. Betterment, Ally, and Wealth Front also offer some of the best options in the market. For a more detailed report on the best robo advisers available check out Nerd Wallet’s thorough comparison of the top options.
If you want to give robo investing a shot, check out SoFi’s site right here to get the details! As long as you invest at least $1,000 they’ll give you an extra $50 in stocks for joining them!
7. Cash Value In Life Insurance Policies
Believe it or not, whole life and universal life policies can often function as a strategic way to growth wealth. These policies have a cash value, which you can draw from in retirement as an income stream.
Indexed universal life policies (the IUL), actually use the stock market to grow your cash value at interest rates as high as 13%! While there will be variation in how your cash value performs each year, insurance companies like National Life Group guarantee you gains of 3% minimum even if the market hits the floor of 0, so no loss is possible (other than your premium costs for the death benefit side of things).
One other perk of growing money through a life insurance policy is that the withdrawals are not taxed, AND the income you pull from a life insurance policy does not count towards your tax bracket. So even if you’re pulling 5 or 6 figures out of your life insurance every year to spend in your retirement, you will not be viewed by the government like you’re making that level of income.
Life insurance is usually just a recommended investment if you have an actual need for the life insurance side of it too. Definitely consult a professional agent and talk over your goals before opting for this method of investing.
8. Worthy Bonds
Bond investment companies can be a great resource to grow your money passively. This is basically how it works: Worthy sets you up with opportunities to lend to business start ups for 36 month periods. You’ll then make 5% gains passively as the business pays back its loan with interest.
The upside to Worthy bonds is that they aren’t affected by the volatility of the stock market. The only risk that you incur is on a defaulted loan, but Worthy Now protects against this by rigorously vetting the businesses applying for credit. Unsafe or risky credit applicants are not included in the pool of options.
Here’s my review based on my experience so far with Worthy Bonds!
9. Independent Growth Stock/Penny Stock/Day Trading
Trading stocks on your own is one of the more risky, but potentially lucrative options out there. This is especially true of penny stock trading, where you can make enormous gains, or big losses, in a matter of hours. I’ve invested in penny stocks that grew my investment by over 65% in only 3 weeks!
If you’re looking for a great way to start small and practice, I recommend using the Robinhood app. Trading on Robinhood is 100% free, and the app makes the whole process super intuitive and easy, which was a relief for a beginner like me. If you’re looking for more advanced trading, or access to more obscure, high-volatility penny stocks, I’ve had the best experience using TD Ameritrade.
Remember, doing your own stock trading requires a lot of research and diligence! Keep an eye on stock forecasts like Stockinvest, Yahoo Finance, Robinhood Snacks newsletter, and even certain free trade alerts like Lionstock Trade Alerts. These have proven to be reliable resources. And never, EVER trade more than you can afford to lose.
10. Rental Properties
Do you know the #1 way people become millionaires in the United States and most of the world? Real estate. There are more millionaires made in real estate than almost any other industry.
One of the best ways that you can build passive wealth is by slowly, carefully accumulating properties. Consult with experienced mentors, such as realtors, investors in your circle of friends and family, or online communities like Bigger Pockets. The more knowledge you can get about how to buy smart, the better equipped you’ll be to find good investment properties.
In most locations you can find foreclosed, bank-owned properties for very cheap, and needing some repairs. These properties can be bought, fixed up, and rented or used as AirBnB spots. Like most investments, it takes a lot of research, some capital, and a willingness to take a bit of risk. Real estate in particular also requires patience, and an ability to look at the long-term gains of an investment.
My wife and I are not very experienced in real estate yet, but rental properties is one of our long-term goals.
Start Growing Your Money While You Sleep!
There’s no time like the present to start growing your money. The best retirement investments to make now are all accessible. But they all require some action, and diligence on your part.
You can see by these 10 simple examples that retirement investing doesn’t have to be rocket science.
How about you? Do you have retirement investment tips? Share them in the comments below!