Are you nearing retirement or have you thought about retirement lately? Financially speaking, I think that retirement is one of the craziest transitions in any person’s life. Think about it. All your life, you’ve been earning money, then earning more money, and still continuing to earn money. All the while, you’re stashing a small portion of it away for your retirement which seems to be in the very distant future. Your savings grow and your nest egg REALLY grows (hopefully)! Then comes that point when it’s time for you to retire and you realize that you’re suddenly not going to make money anymore. Nope, you’re actually going to spend your lump sum very slowly, and hopefully have some by the time you pass away.
Isn’t that just crazy! If I had $500,000 and I found out that I spent $50,000 in a year, I would absolutely freak out! If I kept that up, then I’d really only have enough money to live for 10 years after retirement, and that’s assuming that I don’t have any major ailments or physical accidents. Living off of a large sum of money can be quite stressful, so it’s important to plan it out very carefully. Let’s review some ways that you can still earn some money on that lump sum even after you’re retired.
I’m sure you’ve heard of the term ‘Annuity’ before, but do you really know what it means? Since many people are accustomed to earning a paycheck at regular intervals, many retirees like to invest a lump sum of their retirement account into an annuity, which pays a certain amount of interest (usually fixed) and pays you back your money once a month for a certain period of time, and sometimes for life! The interest isn’t amazing (it’s typically 2% or so), but it’s quite safe when investing with a reputable company, and you get a nice consistent paycheck as well.
Many people don’t think of a checking account as a good investment, but credit unions are offering 3-4% interest on their checking accounts. For my local bank, they only require you to have a regular direct deposit (which could be your annuity), you need to make 10 transactions with your debit card, and you need to check your online account at least 4 times. That’s it! And, you can earn up to 4% on $15,000 (some credit unions may pay on a higher amount than this too), which equates to an extra $600 a year. Now that’s pretty simple.
Bonds are typically not thought of as a great investment because they don’t yield high returns, but they are very low risk and perfect for a retiree. Now, there’s no absolute guarantee that you’ll get your initial investment back, but if you choose a high-graded bond, it’s quite certain that you’ll earn your principle back and earn a little bit of interest on top of that. Play it safe in your retirement. You’re not going to earn 20% on your investments, but since you spent the time to build up a nice nest egg, you really shouldn’t need to.
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