Investing for retirement is one of the best decisions you can make during your working life. With most employers moving away from pensionable jobs to contractual jobs, you need to plan your retirement. Even where there is a pension, it may not be enough for a comfortable lifestyle upon retirement. So, it is up to you to save enough to support yourself when you’re no longer working.
There are many investment plans in Australia where you can put your money in for retirement. However, you need to be very smart in evaluating risks and expected returns on the investment because they vary. In this guide, we have rounded up 10 of the smartest investment plans for retirement.
1 – Superannuation Plan
One of the best ways to invest for retirement is enrolling in the superannuation plans. However, this plan works for employees only. It is a pension program or company pension plan where funds are deposited in the superannuation account. The account is added by the employer based on the employee’s ordinary time earnings. The money is put in an invested where you earn returns. What makes this plan ideal for most employees is that it has no tax implications until retirement or withdrawal.
2 – Listed Investment Companies (LICs)
For those looking to invest in a low-rate environment, then listed investment companies is an ideal option. LICs are traded on the Australia Securities Exchange (ASX), and thus, traders can monitor how their money is performing. The payment is made in the form of dividends from the profits that the company makes. You can reinvest your dividends to increase your shareholding. Once you retire, you can opt to sell your shares, which by now would have appreciated. It’s an ideal option investing for retirement.
3 – Exchange-Traded Funds (EFTs)
EFTs or Income Partnerships is another popular investment plan in the market. It is a type of security that usually includes a collection of securities that closely resembles index funds. Just like the common stock, EFTs can be bought and sold during the day at a profit. What makes them popular is their convenience of stock and diversification at greater transparency and low cost compared to the typical mutual fund. So, return on investment guarantee.
4 – Annuities
There are many reasons why annuities are some of the most popular investments for most people. One of them is a guaranteed regular income. It does not matter how the investments are performing in the markets and how long you live. You are guaranteed a regular income throughout your life. So, once you have put your money in these investments, you will start earning returns on it. It is one of the best investments that guarantees steady income even after retirement. However, the amount of income you receive is equal to the size of your investment.
5 – Corporate Bonds
Corporate bonds are raised by companies to fund their business activities. The bonds are sold to the investors with the promise to pay interests at regular intervals when the bond matures. The amount of interest you get depends on the size of the investment. So, buying corporate bonds can be one of the investments that guarantee a steady source of income even after retirement. However, the paid interest depends on the ability of the project to generate revenue. Therefore, they are a bit high risk but offer higher interests.
6 – Government Bonds
If high-risk corporate bonds scare you, then you can go for the government bonds. These are bonds issued to fund government spending and more so funding projects. They are considered low-risk because the interest is a guarantee. Unlike companies that can get bankrupt, governments never die. So, the interest on these bonds, though lower, is a guarantee. The payment can be periodic or what is called coupon payments or annual.
7 – Real Estate Investment Trusts (REITs)
REITs is another lucrative investment that you should consider for your retirement. It’s a form of investment designed to exploits the real estate industry. In such investments, a management company collects money from shareholders to set up a real estate project. It could be building or buying rental properties in the market. Then, the management will collect rent, pay expenses, and collect a management fee. The rest of the money is shared among the shareholders based on their contributions.
8 – Mutual Funds
As the name suggests, a mutual fund is a type of financial investment where a pool of money is collected from many investors and is invested in securities such as money market instruments, stocks, and bonds, amongst other assets. The fund is operated by a market manager who attempts to produce capital gains or income of the investors. Every investor has shares equal to their contribution, and that’s the percentage of the earned interest they receive. You can easily redeem your share after retirement or opt to continue receiving periodic interests.
9 – Mortgage Funds
A mortgage fund is a type of financial investment where investors pool money together for mortgage investments. The collected money, which is the mortgage fund, is managed by a professional fund manager. It is either lent out as mortgage to borrowers or invested on the other mortgage-related projects such as other mortgage funds. The net interest earned from the fund is shared among the shareholder periodically. Your shares will also appreciate with time.
10 – Rental Real Estate
Rental properties provide a perfect investment for retirement. If you have enough money or can secure a loan to buy or build rental properties, then this would be a perfect investment. With the rentals, you win in a couple of ways. First, you will be getting monthly income from rent. Second, the property will continue to appreciate every year. So, when you retire, your investment will have grown in several folds plus guaranteed monthly income.
Building sufficient resources that guaranteed a comfortable retirement is increasingly becoming a struggle for many people. However, there are small steps that you can start making from an early age to assure a worry-free retirement. Try one or multiple retirement investment plans that we have listed above to secure a comfortable retirement. If you are still having problem planning for your retirement, seek the assistance of a certified planner for your financial planning needs. They will help you pick a retirement plan that works for you.