According to the Transamerica Center for Retirement Studies, the biggest fear people have about retirement is that they will outlive their savings and investments.
This fear is even bigger than physical health concerns, mental decline, or feelings of isolation.
The fact is, boomers these days are living longer than their parents did, which means there’s a corresponding level of angst about outliving their own money.
It doesn’t help that during their careers, most boomers saw a substantial decline or even elimination of traditional pension plans. This removed a significant source of guaranteed, ongoing income from their lives. A source of income that their parents enjoyed in retirement.
If this sounds like you (or where you might be headed), your answer to this problem may be, “Well I have savings.”
That’s great! Savings are always good.
But…
Are those savings working for you in a reliable way to insure a steady income as you get older and no longer have wages from your job after you retire?
If your answer is no, you’re in the right place to start exploring options for making your money work for you.
If your answer is yes, there’s a good chance that you still don’t feel as financially secure as you’d like…
That’s because even in today’s world filled with women who are more powerful, successful, and fulfilled than the women of just a few decades ago, the fear of running out of money is statistically greater for women than it is for men.
A 2014 survey conducted by the American Psychological Association found that “women at all points along the financial spectrum say they lie awake in bed at night and ruminate about finances.”
Could it be because the investments you do currently have may not be cutting it? Let’s take a look.
Stocks
You may have stock investments through your IRA or 401(k) that are paying dividends that provide current cash flow. That can be satisfying…until you think about the taxes this cash flow is subject to.
Not to mention, the volatility of the stock market makes this type of investment more than a little risky.
Stock market investors bet on the success of companies that create products for people to use, like iPhones, Happy Meals, and your favorite beauty products. Although some of these might seem like they’re here to stay, the reality is, it’s impossible to predict how long a product or company will remain popular.
Take a look at Blockbuster Video (remember them?). They had a long and prosperous reign in the video rental and entertainment world, but when technology and consumer behavior changed, the company stagnated, then plummeted.
And they dragged their investors all the way down to the bottom with them.
A company you’re heavily invested in could go bankrupt. I’ll list a few more for good measure: MCI Worldcom, Pan Am Airlines, DeLorean…you get the idea.
And when that happens, your stock drops to zero.
A lot of people have made money with stocks. But every time the market takes a turn for the worse, so do they. And that turn is entirely out of their control.
Bonds
Government and corporate bonds pay the holder a fixed rate of interest income that’s backed by a guarantee from the entity that issues the bond.
Bonds are generally considered safer investments than stocks. This is because, in most cases, there is a very low risk of losing your initial investment. And a bond, by design, pays a predictable amount of interest to the bondholder every year until it matures, at which point the principle investment is returned to the bondholder.
Bonds are attractive for their lower risk and reliable payout. But, consistent with this lower risk, bonds usually generate lower returns over time than investing in stocks.
Gems and Precious Metals
Gems and precious metals might be a good defensive strategy, but even when times are good, most financial experts agree that they aren’t the best investment you can make.
That’s because you have to be in physical possession of the items…which also means they’re easy to lose or have stolen.
Even if you put them in a safety deposit box where they’re safe, it doesn’t change the fact that while you’re holding onto them, you’re not earning any income.
At the end of the day, you’re banking on their appreciation, and when you do sell them, you’ll be paying tax on the gain.
These things sound like more trouble than their worth.
The Alternative
Investing your money in assets — real assets — that produce cash flow during your lifetime, appreciate in value, and continue to pay benefits to your children after you’re gone just makes more sense. Of course I’m talking about real estate investing. If this piques your curiosity, and sounds possibly like a better alternative investment for you, please read our other blog posts that explore various forms of real estate investing, in particular passive investing.
Or better yet, sign up for our Street Smart Investor Club where you can get information on real estate investments that might just be the perfect fit for you.
