Retirement Planning – What Are the Best Retirement Investments for Your Portfolio?

Retirement Planning

Saving for retirement is not always as easy as it seems. While most people know of or have heard of different retirement accounts, investment options, and portfolio strategies available to build a significant retirement corpus, not many have a strategy in place that is best suited to their financial needs and goals. Your retirement plan differs at every stage of your life. For example, if you are young, single, and have little to no responsibilities, you can afford to take on more risk. However, if you are already burdened by family responsibilities and debt, taking on risk may not be the best thing to do.

The ideal retirement plan for your financial needs will align with your changing life stages, personal relationships, professional growth, age, and temperament. The best way to invest for retirement is to choose instruments that fit your unique requirements and goals. A combination of different retirement investment options like pension accounts, insurance, stocks, bonds, etc. ensures that you get good returns and, at the same time, are able to balance out the risk. In this article, we will look at some of the best investments for retirement that can help you save for your future and secure the non-working years of your life.

What is the Best Investment for Your Retirement Plan?

Here are some investment options you can consider adding to your retirement investment portfolio:

    1. Retirement accounts: Retirement investment accounts like a 401(k) account, an Individual Retirement Account (IRA), Roth IRA, traditional 401(k), etc., offer tax-free growth on your money. These accounts are one of the most common ways of saving for your golden years. A 401 (k) account is an employer-sponsored account and can have a matching contribution from the employer. On the other hand, an IRA is something that you start on your own and as a result, you are the only contributor to the account. The withdrawals from a 401(k) and an IRA are generally taxed as per your taxable income in retirement. There are also penalties on withdrawals taken before the maturity date of these accounts. Every year, the Internal Revenue Services (IRS) fixes a contribution limit up to which you can contribute to these accounts in a year. There are also catch-up contribution limits for people over the age of 50. A 401(k) account typically offers mutual fund options selected by the sponsor. The employees can select the funds as per their risk appetite. An IRA also offers other investment options, such as bonds, stocks, real estate, certificates of deposit (CDs), etc.

Despite their popularity, there is a large population that still does not invest in these retirement accounts. Recently a Vanguard report titled ‘How America Saves’ stated that approximately 33% of people had no workplace savings account.

Keep in mind that retirement accounts can be a simple way to save for your retirement. They do not require a deep knowledge of investments and yet offer a good return. An IRA can also be used to save for other goals, such as higher education expenses. Hence, adding them to your portfolio can benefit you greatly in the long run.

    1. Bonds: Bonds are suitable for investors who do not like a lot of risk in their retirement portfolios. A bond is similar to a loan. However, you are the lender here. You loan money to the government, municipality, or a corporation and, in return, receive dividends. The dividends are the interest that the borrower pays you back along with the principal amount. Your final return can depend on the type of bond you invest in, the investment duration, and the total money invested. Bonds are a lot less volatile than stocks and hence make for a safe investment option. If you are nearing retirement, bonds can offer stability and reduce the risk on your investment portfolio. While bonds are usually recommended to people in their 50s and early 60s, they can be used by people of all ages as the returns are generally high, especially with corporate bonds. Unlike stocks, the prices of bonds do not fluctuate as much and are, hence, easier to manage. The biggest advantage of investing in a bond is that the dividends provide regular income. This can be a blessing in retirement.


    1. Stocks: Stocks are considered to be volatile and, hence, can bring in some risk. However, they’re a good option for your investment portfolio, especially if you are not retiring any time soon. Retirement planning should ideally begin from your first paycheck. This gives you a long investment horizon that, in turn, offers two benefits – the power of compounding and enough time to bounce back from losses. Investing in stocks when you are young can offer you high returns. Additionally, if you face any losses, you have enough time to recover. Stocks are traded on stock exchanges and put out by companies. When you invest in a stock of a company, you own a part of the company and become a shareholder. So, when the company earns a profit, you get a part of it too.


Stocks are highly liquid. The buying and selling of stocks happen on the stock exchange, and you can purchase and sell stocks at any time within the operating hours of the market. Though there may be tax liabilities, they are still useful in emergencies. Investing in stocks can help you achieve varied financial goals. But they can also be unpredictable and unstable. Unless you have enough knowledge of how they work, it may be advised to consult a professional financial advisor before making any decisions.

How to Invest for Retirement

Apart from knowing different retirement investment options, you must also know the best way to invest for retirement. Investing strategies for retirement can differ for different people depending on their age, goals, income, liabilities, etc. Typically, there are three types of portfolios:

    • Growth portfolios: The purpose of a growth portfolio is, in simple terms, to offer growth. Such portfolios consist of volatile yet highly rewarding investment options such as stocks. A growth portfolio is ideal for people who have many years left to retire and can afford to take on some risk. A growth portfolio helps you build up a significant portion of your retirement fund early in life with calculated risks. However, it is important to diversify well here. Concentrating too much risk on a single asset class or investment type can be a recipe for disaster. Diversification can help you distribute your risk to different types of investments and ensure that you do not lose your money at every market low.


    • Balanced portfolios: As the name suggests, a balanced portfolio offers a balanced solution to investors. Such portfolios consist of a moderate blend of high and low-risk investments, such as stocks and bonds, to offer investors moderate risk and balanced returns. The focus here is not on growth but risk. A balanced portfolio is generally considered ideal for middle age groups that may have a good number of years left to retire, but also have other liabilities along the way, such as saving up for a child’s higher education, paying mortgage on a home, loan repayments, etc. With so many liabilities, they are likely to want moderate risk and hence can opt for a balanced portfolio. Unfortunately with interest rates currently so low, bonds may not help achieve your retirement goals. A portfolio too heavily weighted to bonds may be risky as well.


    • Income portfolios: The primary aim of an income portfolio is to generate income. That is why it consists of investments like dividend-paying stocks etc. An income portfolio follows a conservative strategy to generate enough income in retirement. An income portfolio banks on the power of compounding. It offers security and capital preservation, something that people in their 50s or early 60s often crave as they find themselves nearing retirement. The risk involved is quite low and the returns are steady. The best way to choose the right portfolio for yourself is by analyzing your current needs and future requirements. Keep in mind that there are no fixed rules of investing that can apply to everyone. The final decision always depends on your goals and temperament. If you are not sure what to invest in or when and where to begin, you can always hire a financial advisor and get professional guidance.


To Conclude

The best investments for retirement are those that help you achieve your goals without stressing you out or resulting in high tax outputs. Remember that your goals are dynamic and constantly changing, so it becomes essential to revisit and rebalance your portfolio from time to time. It is also important to make the most of market opportunities and to be at the right place at the right time, something that a professional advisor can help you with. So, if you haven’t yet drafted your retirement investment portfolio, consult a professional financial advisor near you to get started.