Planning for retirement can be a complicated task. Figuring out how much money you can count on can easily become overwhelming. Even if you have a strong 401(k) plan, it may not be enough to cover your needs. Meanwhile, investing your savings in high-return projects comes with serious risks.
One of the best ways to give yourself strong backup is to implement safe money and income strategies in your retirement planning. It can help you enjoy peace of mind regardless of market volatility.
Understanding “Safe Money” in Retirement Planning
The goal of a safe money strategy is to protect a part of your investments from the market’s unpredictability. Instead of yielding high returns like stocks or mutual funds, safe money remains stable through the market’s uptime and downtime. Essentially, it’s a stable investment that keeps your money working for you while minimizing the danger of losing it.
Exercising a strong safe money strategy is key to the safety of your funds during retirement. You can often a secure safe money account without paying any fees.
Safe money solutions focus on preservation and protection. When you retire and stop receiving active income, such a strategy could be highly preferable.
Key Characteristics of Safe Money
When you are creating your retirement portfolio, you must know the characteristics of each investment. Main safe money features are:
Principal Protection
Safe money aims to preserve the original invested amount. Unlike equities or real estate, it shields your principal from market-related losses.
Predictable Returns
Safe money investments usually have fixed or guaranteed interest rates. While these returns are often lower than riskier investments, they are stable. This helps retirees plan their budget.
Low Market Volatility
These financial tools operate independently of stock or bond market swings. Even if the market changes, the safe money investment remains steady.
Insurance or Government Backing
Many safe money options are either insured by the FDIC or backed by reputable insurance companies. This adds an additional layer of protection against loss.
Tax-Deferred Growth Options
Some safe money tools, like fixed annuities, offer tax-deferred growth. This means that investors don’t pay taxes on earnings until they withdraw. This can help stretch your retirement income for many years.
Common Safe Money Options
A safe money strategy can include one or more options. Some opportunities to consider include:
Fixed Annuities:
- Fixed annuities are contracts with an insurance company that guarantee a fixed rate for the investment over a set period of time.
Certificates of Deposit (CDs):
- A CD is an FDIC-insurance contract with the bank that offers fixed interest rates over a set term.
Money Market Accounts:
- These savings accounts (often FDIC insured) provide slightly higher interest than traditional savings accounts. They ofter flexibility with a balance between safety and liquidity.
Stable Value Funds:
- Stable value funds (often an option in a retirement plan) invest in high-quality, short – to intermediate-term securities and offer consistent returns with low volatility.
The choice of the best option for your needs depends on many factors, including your existing retirement plans, assets, and portfolio. To make the most out of the safe money planning, consider consulting with us.
Contact Us at Prosperity Group Advisors to Learn More About Safe Money
At Prosperity Group, we specialize in protecting your assets and making them work for you for years to come. If you’re ready to add safe money and income solutions to your retirement plan, our professional advisors are here to help.
Contact us today for an in-depth consultation and visit our YouTube channel for more financial tips and insights.