What Kind of Investments Will Yield Me a Return for Retirement?
The bursting of the real estate bubble in 2008 caused a severe ripple effect on the economy that systematically pushed interest rates on bank accounts below 1 percent. Gone are the days when retirees could simply open a bank account and earn 5 percent or more interest risk-free on their savings. However, there are still investments that will yield you high returns for retirement, and they do so reliably and consistently.
Stocks have a reputation for being risky. But dividend stocks balance that risk with the reward of a steady check from the company to the investors. Not all dividend stocks are created equally. Some dividend stocks are most certainly riskier than others. It is best to stick to dividend stocks issued by solid companies with a long history of earnings growth and steadily increasing dividend payments. All that glitters is not gold. Companies that pay super-high, double-digit dividends may be on shaky ground. The high return may look tempting, but you won't be so happy if the stock price falls so low it wipes out what you receive in dividends.
When properly used, bonds can be safe and solid investments. A bond is simply an IOU issued by a government agency or publicly traded company in order to raise money to fund its operations. The investor buys the bonds and the government agency or corporation promises to return the money it has borrowed after a specified period of time. Meanwhile, the investor receives a steady flow of interest payments. The quality of the bonds you buy depend on the financial soundness of the issuer. Bonds issued by the U.S. government are considered risk-free, but they pay low interest. Corporate bonds pay more interest. Rating agencies grade corporate bonds for their financial strength from excellent to poor.
Buying rental property can potentially be one of the most profitable ways to yield a return for retirement. Leveraging a down payment with money from the bank to buy small houses and apartment buildings can often yield double-digit returns on your investment. Investors of rental property should focus on properties that are priced at or below fair market value and they should make sure they will receive more in rent payments than it will cost to pay the mortgage and other expenses related to the property.
An immediate annuity will yield you a guaranteed return on your money for retirement. An immediate annuity is a contract you enter with an insurance company. You agree to give the insurance company a lump sum of money. In return, the insurance company promises to pay you a monthly income, called an annuity, for the rest of your life. There also is risk involved with an annuity. If an annuity investor dies right after buying the annuity, the insurance company often keeps all the money. But if the investor lives well past his normal life expectancy, the insurance company is obligated to keep sending the monthly payments.
Tim Grant has been a journalist since 1989 and has worked for several daily newspapers, including the Charleston "Post & Courier," the "Savannah News-Press," the "Spartanburg Herald-Journal," the "St. Petersburg Times" and the "Pittsburgh Post-Gazette." He has covered a variety of subjects and beats, including crime, government, education, religion and business. He graduated from The Citadel with a Bachelor of Science in business administration.