Retirement Investment

Retirement Planning: 16 Tips To Choose The Best Retirement Investments

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If you’re just starting your career, retirement is most likely the last thing on your mind. However, not having a retirement plan is a detrimental mistake many people often make. They often end up having to depend on their children or social security to meet their daily expenses. Fortunately, this doesn’t have to be the case if you start saving regularly at an early age and getting into tax-advantaged retirement investments. 

With that said, deciding which retirement investment to opt for isn’t straightforward due to the many different types of retirement investment vehicles. Examples of these include solo 401(k)plans, traditional pensions, defined contribution plans, cash-balance plans, and IRA plans. Choosing these investment vehicles is better than saving your money in a bank as they can provide you effective means to hedge against inflation. But how can you identify the best retirement investment? Here are tips to consider in choosing the best retirement investment for you.     

1. Examine The Inflation Adjustment 

Examine The Inflation Adjustment

An essential factor you must consider when deciding on the retirement investment to choose is whether the returns are inflation-adjusted. It’s best to do this as the value of money falls with each passing year. Therefore, you must always choose a retirement investment vehicle that guarantees your potential returns aren’t affected by the prevailing inflation, as retirement planning is a long-term monetary objective. 

With the right retirement plan, you’re guaranteed that the value of your money won’t be eroded when the time comes you’d want to redeem your investment. This is crucial to hedge against the yearly inflation that can be as small as 3%, but in the long run, let’s say after 25 years, lower your money’s value by around 50%. This is a significant dent in your retirement savings, so you need to choose a retirement investment that guarantees you a greater return of investment (ROI) than the inflation rate. By doing this, you can be certain that the worth of your money isn’t eroded over time.  

2. Know Your Time Horizon 

Know Your Time Horizon

Understanding the length of time you have to hold your money as a retirement investment is essential as it helps you develop an effective retirement strategy. If you don’t have much time before your retirement, then choosing a retirement investment portfolio that’s less risky is advised. These investments such as bonds, despite not yielding great returns, are a lot safer due to their less volatile nature—meaning they can offer you a stable income after retiring. 

In contrast, you should go for a riskier investment portfolio if you’re younger with so much time on your hands before retirement. While these riskier investments tend to be a lot volatile, they will, in the long run, yield you greater returns and are ideal if you’re still far from retiring.  

3. Review Various Retirement Investment Options 

Review Various Retirement Investment Options

You shouldn’t select a particular retirement investment option without first observing due diligence and examining the different options on the market. After all, there are many products available for you to choose from, and getting as much information as possible will help you make an informed decision. 

When going over the reviews of the different retirement investment options, you shouldn’t simply focus on the basic details that are easily available. Instead, it would be best if you aimed to get a better picture of the investment’s percentages and dollar amounts. By doing this, you’ll have a clearer picture of the best retirement investment option for your needs. 

4. Be Aware Of The Expenses

Be Aware Of The Expenses

The fees of the different retirement investments usually differ. And because your goal is to save as much of your money towards your retirement, you should avoid retirement investment options with expensive charges or expenses. Because of this, you must always take your time to compare the different retirement investment plans. This will help you make an informed decision on what’s best for your needs. 

5. Consider Its Flexibility 

Retirement Investment

Life isn’t perfect and has its ups and downs, so you should always pick a flexible retirement investment. With this, you can easily change how much money you’re channeling to the retirement plan without any consequences. For example, you would want a retirement investment that allows you to easily enter and leave if you find the current market conditions unfavorable. Likewise, the investment should allow you to considerably increase the premiums you’re paying after getting an increase in your income. You should also be permitted to reduce your premiums in case of an unforeseen financial hurdle. 

6. Consult A Financial Planner 

Retirement Investment

Because retirement planning is a multistep process that’s constantly evolving, it requires extensive planning. For any individual, this is not something that requires expertise and experience to execute properly. However, this doesn’t mean you should forego financial planning altogether. Instead, you can hire a skilled financial planner to perform this on your behalf. 

With the guidance of a financial planner, you’ll get to know the best retirement plan and the most efficient process to follow. 

7. Choose An Investment That Gives Chances

Retirement Investment

You can never be too sure that there won’t be unforeseen obligations arising in the future. When this happens, you may not be in a financial position to make such contributions. You should prevent such from happening by choosing a retirement investment scheme that gives you the chance to pay later in case of these situations. If not, you might end up paying hefty fines, thereby making the retirement investment counterproductive. 

Therefore, you need to choose a retirement investment option that fits your needs and is a lot more understanding of the financial situation you’re going through. 

8. Know Your Investment Goals And Risk Tolerance


Retirement Investment

How much risk are you ready to take to achieve your retirement goals? You must always ask yourself this question before deciding on which retirement investment vehicle is the most suitable pick. The ideal retirement investment must balance your return goals. This is why you should also be risk-averse. 

You must be aware of the risks that come with your chosen retirement investment plan and ensure that you’re comfortable with these risks. This also allows you to draw the line between your necessities and luxuries.

9. Understand Your Retirement Needs 

Retirement Investment

Most people feel overwhelmed by the idea of saving for retirement due to the future’s uncertainty, and as a result, end up saving nothing altogether. However, it doesn’t have to be like this, and you should start by first identifying retirement goals that will assist you in the decision-making process. The amount of money you’ll get for various investment plans will differ. Thus, you need to map a clear outline of your retirement needs to identify the best retirement plan for your future. 

Some of the costs you should consider when calculating your retirement needs include:

  • Healthcare costs 
  • Housing expenses (for instance, heating, mortgage, maintenance, and water bills)
  • Daily living expenses (such as transportation, clothing, and food) 
  • Travel expenses (such as hotels and flights) 
  • Life insurance 

When calculating your post-retirement budget, you need to maintain a realistic approach to ensure that your retirement portfolio is suitable for your lifestyle. This means not making the assumption made by most people that one’s annual spending habit will fall between 70% to 80% of previous expenditures. But such postulations are often incorrect especially if you still haven’t finished your mortgage payments even after retirement. You’ll also most likely travel a lot more now that you’re free. And you’ll also have to pay for unexpected medical costs. 

10. Ensure Guaranteed Income 

Retirement Investment

Despite having lots of savings while you’re still young, there’s still a possibility for this money to eventually run out. Upon retirement, this is the last thing you’d want as it forces you to make abrupt lifestyle changes; since you’ll be entirely dependent on Social Security. Another scenario is needing to move in with your loved ones, but this only causes them further inconvenience. You might even have to find a job despite your old age. 

You should avoid these scenarios by choosing a retirement plan that provides you with guaranteed income for life. This will make you enjoy peace of mind and saves you all the trouble of looking for other sources of income. 

11. Consider Complimentary Investment Benefits 

Retirement Investment

Another thing you should factor in when deciding on the most suitable retirement plan is whether there are added features to it. For example, some retirement investments can provide you with benefits such as continuous pension income and waiving off payment of premiums after the policyholder passes away. Other things that should guide you in choosing the best retirement investment include severe illness benefits and higher costs for accidental death. 

12. Determine The After-Tax Investment Returns


Retirement Investment

You also need to know the after-tax rate of returns you’ll get by choosing any specific retirement investment. To know this, you should always examine whether such retirement investment can generate your desired return. You’ll only make the right decision after computing the accurate after-tax return of your chosen investment. 

With that said, you shouldn’t expect the tax returns to be over 10%, as this is somewhat unrealistic. This also applies to long-term investment. When you get older, your retirement investment yields will be a lot lower since they will mainly comprise low-yielding fixed-income securities. Because retirement investments don’t offer you unrealistic returns, it’s best to start investing in one while you’re still young.

For some of the retirement investments, you’ll be taxed from the onset and the calculation of the actual rate is usually done on an after-tax basis. Therefore, make sure you know the tax status before choosing a retirement investment. 

13. Know The Vesting Age 

It’s also essential to examine the vesting age of a retirement investment to make sure you select one that matches your needs. This is because there are retirement investments with a vesting age that starts at 40 years while others reach maturity at 85 years. Understanding the different vesting ages will help you determine which plan is the best for you, likewise depending on whether you want an early or late retirement. 

14. Consider The Investment’s Liquidity 

After retiring, your liquidity requirements will undoubtedly increase to cater to your daily expenses and payment of medical bills. If your money is stored in a retirement investment for a particular duration, you’ll have to deal with a great level of financial distress. You wouldn’t want to go through such turmoil, and the best way to avoid this is by choosing a retirement investment that allows you to withdraw your money upon request easily. This way, the last thing on your mind will be concerns about the investment’s liquidity. 

15. Choose One With An Appropriate Annuity Alternative 

When deciding on the retirement investment to go for, choose one that provides you with an annuity alternative that suits you best. This is crucial as some retirement plans guarantee the nominees a specified annuity amount even after the assured person has passed away. Likewise, other retirement investments guarantee to keep paying annuity regardless of whether the assured individual is alive or not. 

16. Compare Products From Various Providers 

There’s no way to know the best retirement investment without comparing the products offered by different providers. This means examining the crucial information and details for each of the retirement investments. By doing this, you’ll get an overview of all the specifics for each offer, which helps you make an informed decision. It’s a requirement for the providers to provide you with this information. Failure to do so will give rise to a legitimate reason for filing a complaint against them. 


No one wants to retire and end up having a hard time maintaining their lifestyle and overly depending on their loved ones. The only way to avoid this from happening is by making retirement planning a life requirement. As a result, you’ll be able to ensure that your retirement is easy, secure, and comfortable. But because choosing the ideal retirement investment can be often confusing, this guide has highlighted the essential tips to consider in ensuring you pick the right one that materializes your retirement goals. 

Christopher Miller

Christopher Miller is an investment consultant. He has been helping beginning investors build their investment portfolios for 12 years. He shares his knowledge through blogging. Chris likes to go mountain climbing and try cooking different recipes during his free time. 

Also Read: 3 Things Your Business Can Outsource To Save Time And Money



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