Plan For Retirement With Fixed Income Investments

When planning for your retirement, you should take into account various financial risks, such as stock market crash or recession. The stock market is by its very nature volatile, but there are options that can provided you with reliable retirement income. Many bonds can be extremely stable. Fixed income investments provide retirees with a regular amount of money each month.

What is a Fixed Income?

Your retirement income can come from several sources. For example, you may be planning on income coming from one of the following...
  • Social Security
  • Pension
  • Investments
  • Annuities
A fixed income comes from a source that pays out the same amount in defined intervals, such as payment from a monthly pension plan, or social security. While this income may be steady, it will rarely result in a big payout if the stock market experiences a surge. Of course you are also protected from a big drop in your portfolio if the market drops suddenly. A retirement portfolio is often built around a source of fixed income, to provide security throughout retirement.

Risk and Timing

Everyone knows you need to begin saving for retirement as early as possible. Even putting aside as little as 5 dollars a month can have a huge impact on the health of your retirement finances if started early enough.  An early start to retirement saving is the best method to prepare for risk,.  The earlier you start saving and investing for retirement, the more time you have time to make up for collapses and market corrections. As you get closer to the date you retire, you have less time to make up finances lost in market downturns or recessions. While you can assume larger risks when you are younger, the closer you get to retirement the more your focus should be on minimal risk investments and fixed income opportunities. As you age, review your accounts to make sure that your investment dollars are invested in funds that are not inclined to "roller coaster" as the market fluctuates.

Investments to Watch

As you get closer to retirement, consider putting money into funds that are designed to meet or beat inflation, such as Treasury Inflation-Protected Securities. While such investments are timed and pay out at the end of the investment term (5 years, for example), you will receive a payout every six months on a percentage of the investment and the full payout, with interest, at the end. Owning such investments in an IRA can reduce your tax burden.

Stock Picking

Unless studying and understanding the stock market has been a big part of your profession, trying to build money by picking stocks can be very risky. Once you've reached retirement age and have some time to study, you may enjoy putting some of your savings into stocks that could provide a bigger payout. Wise investors will only make these investments with money they can afford to lose, or at least wait for. While fixed income investments won't be nearly as exciting, they are much more secure. That being said, if you stay on top of the news and enjoy watching the markets, you may find companies or funds that catch your interest or share your ethos. If these funds can beat inflation and provide you with an occasional boon, celebrate. However, unless you have enough income to take a risk, study up on these funds and invest sparingly.

Buy for the Long Term

Many fixed income investments require you to buy for the long term. For example, a zero coupon bond won't cost you much now, and you will make interest on it when it matures, but that may be five years down the road. If you have a sizable expense planned for the future and your financial needs are covered, you may find that these investments are ideal for your portfolio.