Investing for Retirement 101

While investing can be an effective way to help grow your retirement savings, it can also be confusing and overwhelming. But with the proper guidance, it can be easy.

Retirement can be an exciting time, but it can also be filled with uncertainties, especially regarding finances. One essential challenge retirees face is ensuring they have enough money to last through their retirement years. 

If you’re unprepared for retirement, it can be easy to assume that Social Security will be enough to get you by. However, Social Security retirement benefits are designed to replace only about 40% of your pre-retirement earnings, which may be even lower for higher earners. Therefore, it’s crucial to supplement your benefits with a pension (if available), savings, and investments. 

Start With a Plan

Having a plan in place before you start investing is crucial. Your plan should outline your retirement goals, the money you’ll need, and your risk tolerance. With this plan laid out, you’ll be better equipped to make investment decisions that align with your goals and keep you on track for retirement.

When it comes to retirement, there’s no one-size-fits-all investment plan, but there is likely an investment vehicle (or combination of vehicles) that works best for your unique needs. Here are some of the most common retirement plans:

• 401(k)
• Roth IRA
• Traditional IRA
• Self-directed IRA
• Simple IRA
• SEP IRA
• Solo 401(k)

Generally, the best programs offer tax advantages and potentially matching contributions. If you are still in the workforce, a 401(k) with an employer match is an excellent place to start.

If you don’t have access to a workplace retirement plan or are already contributing to a 401(k) and want to explore other retirement savings options, further investment options can include:

1. Gold: Gold is the – well – gold standard as a hedge against inflation. It’s a tangible asset, generally stable and especially well suited to situations where a nation’s currency may be taking a downturn. 
2. Real Estate: Real estate prices are dropping, nationally after the massive boom we witnessed in the last two years. How long will this downturn last? It’s difficult to say, but like bear markets, we can expect the downturn to eventually head in the right direction. Like any other investment, consider your position and the value of what you’re considering buying into.
3. Equities: The current bear market can offer great opportunities in stock investing. From 1926 to 2019, eventual bull markets have lasted 6.6 years on average and produced total returns of 339%. If your position allows, consider investing while value presents itself.

Determine Your Risk Tolerance

Risk tolerance is the amount of risk you are willing to take when investing. As a retiree, your risk tolerance may be lower than someone younger and has more time to recover from losses. Since retirees often have less time to recover from investment losses and may rely more heavily on their investment portfolios for income, they may prefer a more conservative investment approach that prioritizes stability and income.

Factors influencing your risk tolerance include age, financial situation, investment experience, and personal preferences. You may choose to invest in low-risk assets, such as bonds or other fixed-income securities, for a steady stream of income with less risk, or you may be willing to take on more risk by investing in growth-oriented assets, such as stocks, for higher returns over the long term.

To have your investment decisions align with your retirement goals, it’s essential to have a clear understanding of your financial goals and investment preferences. Consulting with a financial advisor experienced in investing can be a helpful way to assess your risk tolerance and develop an investment strategy tailored to your needs.

Diversify Your Investments

Diversification is a crucial investment strategy that can help to reduce risk and ensure consistent returns on your investment portfolio. This strategy involves spreading your investments across different asset classes, such as stocks, bonds, and real estate, to minimize the risk associated with any particular asset.

The goal of diversification is to create a balanced investment portfolio that is not overly concentrated in any one area. By investing in a variety of assets with different risk levels and performance characteristics, you can help to protect your portfolio against fluctuations in any one market sector or asset class.

Consider Income Annuities

Despite the criticism, annuities can be a valuable addition to your retirement plan, offering safety, long-term growth, and a reliable source of income. Retirees often use annuities to supplement other sources of income and cover expenses that may persist in retirement. Some annuities offer liquidity features that ensure you or your heirs receive the entire investment amount back.

Investing in annuities provides additional benefits, including:

• A steady and predictable source of income in retirement, regardless of market fluctuations.
• Tax-deferred growth and tax-advantaged income, potentially earning more on your investments.
• Flexibility in retirement savings.
• Potential for payments to continue to your beneficiaries after your death, ensuring that your loved ones are cared for even after you’re gone.

Here’s a look at some of the different kinds of annuities and their benefits:

At APO Financial, our top pick for annuities is Indexed Annuities.

An indexed annuity, also known as a fixed-index or equity-indexed annuity, is a tax-deferred, long-term savings option that provides principal protection in a down market and opportunity for growth. Indexed annuities offer a minimum guaranteed interest rate combined with an interest rate tied to a broad stock market index, such as the S&P 500 or the Dow Jones Industrial Average.

People often refer to indexed annuities as hybrids of fixed and variable annuities. This unique hybrid design can offer protection against stock market losses, as well as the potential to profit from the market’s gains. Benefits of indexed annuities include:

1. Guaranteed minimum interest rate: Indexed annuities offer a minimum guaranteed interest rate, which means that the investor is guaranteed to earn a certain rate of return, regardless of how the underlying index performs.
2. Potential for higher returns: In addition to the guaranteed minimum interest rate, indexed annuities also offer the potential for higher returns. This is because the interest rate is tied to the performance of a market index, such as the S&P 500.
3. Protection against market downturns: Indexed annuities can also provide protection against market downturns. If the index that the annuity is tied to performs poorly, the investor’s principal is protected and will not decline in value.
4. Tax-deferred growth: Like other annuities, indexed annuities offer tax-deferred growth. This means that the investor does not pay taxes on the earnings until they withdraw the money.
5. Lifetime income: Indexed annuities can also provide a guaranteed income stream for life, which can be an attractive feature for retirees who are looking for a steady source of income.

It’s important to note that indexed annuities are not without risks, and investors should carefully consider the terms and conditions of the annuity before investing. Your trusted financial advisor can go over every annuity type with you to determine the best strategy for your unique circumstances.

Consider Investing in Low-Cost Index Funds

Index funds track a specific stock market index, such as the S&P 500 or the Dow Jones Industrial Average. These funds invest in the same securities that make up the index they track, so their performance closely mirrors that of the index.

One of the main benefits of investing in index funds is their low cost. Because they are passively managed and don’t require as much research and analysis as actively managed funds, they typically have lower management fees and expense ratios. This makes them attractive for investors looking for a low-cost investment option that offers broad market exposure.

For retirees, index funds can be an especially appealing investment option. Low Index funds require minimal maintenance and offer broad exposure to the market. They are well-suited for retirees needing more time or inclination to manage their investments actively. In addition, their low fees can reduce the overall cost of retirement investing and increase long-term returns.

Work With a Financial Advisor

Depending on your investing expertise, you may see better investment results working with an advisor than by managing money yourself.

A financial advisor can help you create a retirement plan, determine your risk tolerance, and select investments that align with your unique financial needs. They can also provide ongoing advice and support to ensure your assets align with your retirement goals.

At APO Financial, we can assist in investment opportunities and strategies to help ensure your money lasts through your golden years. Our experienced Fiduciary advisors continually research investment options and monitor your investment performance so you don’t have to.

Final Thoughts

APO Financial understands retirement planning involves more than just picking stocks or bonds. Our objective is to clarify the concept of investing by implementing consistent, stable, and repeatable active asset management strategies.

Our focus is on low-risk and low-volatility assets that prioritize a cautious approach to wealth management. By working together, we will craft a sustainable income plan tailored to your specific needs.

Our Defensive Private Wealth Management program serves as the cornerstone of our strategy, aimed at providing you with the confidence to approach retirement with a clear understanding of your income needs.

 Schedule a complimentary consultation with us, and let us help you on your journey to retirement.

© 2023 APO Financial. All rights reserved.

Disclosure: 

Communications such as this are not impartial and are provided in connection with advertising and marketing. This material is not suggesting a specific course of action or any action at all.. Prior to making any investment, insurance, financial or legal decision, you should always seek individualized advice from a financial, insurance, legal or tax professional that takes into account all of the particular facts and circumstances of your individual own situation

Investment advice is offered through APO Financial Services, LLC (“APO") 10155 Westmoor Drive, Suite 175, Westminster, Colorado 80021-2627, an investment adviser registered with the Securities and Exchange Commission. Registration with the SEC should not be construed to imply that the SEC has approved or endorsed qualifications or the services offered or that its personnel possess a particular level of skill, expertise or training. Important information and disclosures related to APO are available at https://apofinancial1.wpengine.com. Additional information pertaining to APO’s registration status, its business operations, services and fees, and its current written disclosure statement is available on the SEC’s investment adviser public website at https://www.adviserinfo.sec.gov.

Information relating to annuities is intended for educational purposs only and should not be construed as comprehensive or all-inclusive. Therefore, it should not be regarded as a complete analysis of the subjects discussed and should not be used to make an investment decision.

Annuities can be an important part of an overall portfolio but may not be appropriate for everyone. Before purchasing an annuity, it is important to understand the details of the product. Certain products may not be available in your state. The terms of each indexed annuity varies. It is always important to speak to a financial professional. about an annuity’s features, benefits and fees, and whether an annuity is appropriate for you, based on your financial situation and objectives. Participation rates, cap rates and/or index spreads may be subject to change by the insurance company according to the annuity contract provisions. If the insurance company makes such changes, this could adversely affect the return. Guarantees of an indexed annuity are backed by the claims-paying ability of the underwriting insurance company. The surrender charge period for a product may be longer, and the surrender charges may be higher than other annuity products. Indexed annuities are long-term investments. If the annuity contract is surrendered early, there is the possibility of a surrender charge being imposed and/or the funds may be subject to income taxes. The IRS may also impose a 10% penalty on withdrawals prior to age 59 ½, depending on the circumstances. With indexed annuities, there is the potential to lose money, depending on the product charges and minimum guarantee contract provisions. For additional information on annuities, reference the following websites: The FINRA (www.FINRA.org), the Securities and Exchange Commission (www.SEC.gov), Insured Retirement Institute (www.irionline.org), the National Association of Insurance Commissioners (www.NAIC.org) or your state's insurance department.