Retirement savings investment strategies are essential for those who dream of retirement. Having tranquility, time to travel, and fulfilling dreams that work currently prevents may seem ideal. However, without a solid investment strategy, achieving this goal can turn into a real nightmare.
Nightmare because a bad retirement strategy leads to a retirement of financial difficulty, having to work informally to supplement income. With that in mind, we have filtered the best retirement savings investment strategies so that you do not have problems in old age.
In fact, many of the retirement savings investment strategies can be applied together. This is undoubtedly a great strategy, as it can take advantage of all investment options. Keep reading and see what practices you should take to retire the right way.
1. Start investing early (Retirement savings investment strategies)
It is a fact that the sooner you start investing, the better your result will be.
When we think about retirement savings investment strategies, we are talking about long-term. Thus, if you start investing new (between 1 and 30 years old), you can see your money working for you when you reach retirement age.
What is compound interest?
In principle, it is quite simple, compound interest is interest on interest. For example, if you invest US$ 100.00 and this amount yields 10% in the year (already excluding taxes), in 12 months you will have US$ 110.00. Next year, the interest will not be on US$ 100.00, but on US$ 110.00.
Using low values, it seems that the yield is not so profitable, but consider this profitability with large amounts invested?
Investors call compound interest a “positive snowball.” While the “negative snowball” is the accumulation of debts that due to interest end up being unpayable, the “positive snowball” is when interest works in your favor, making your money appreciate more and more every day.
2. Estimate the amount you will need in retirement income
To plan for your retirement, you should estimate the amount you will need in income in the future. A common mistake is to consider inflation in the account, but the ideal is to focus only on the expected real interest.
Investors indicate that you always project profitability in the long term, considering real interest, that is, those you expect to receive.
The next step is to calculate the amount needed to maintain a comfortable standard of living at today’s values. Suppose you need $100,000 per year and the actual interest on the investment is 4% per year.
Now, just calculate the amount necessary for this amount to yield 3.5% per year. To do this, US$ 100,000.00 is divided by 3.5%, reaching an approximate value of US$ 2,500,000.
When calculating, you need to consider not only basic needs, such as food and housing, but also leisure and quality of life. After all, it makes no sense to be retired, but without being able to enjoy it.
3. Buy real estate (Retirement savings investment strategies)
Investing in real estate remains one of the safest and most profitable ways to build wealth over time.
Advantages of investing in real estate:
- Double gain: In addition to equity appreciation, the investor can earn passive income from rent.
- Protection against inflation: Historically, real estate prices have followed or exceeded inflation, preserving purchasing power.
- Better long-term performance: Real estate offers higher returns than traditional financial investments.
- Decision-making power and hidden opportunities: The investor has control over negotiations, reforms, and strategies, being able to identify opportunities in the market.
Disadvantages of investing in real estate:
- Concentration of equity: to invest in real estate you need a high value that for most people represents most of the equity;
- Low liquidity: Selling a property can take time, making it difficult to quickly redeem the invested capital.
- Individual risks: Vacancy, deterioration, and location can impact the expected return.
Still, this is undoubtedly one of the best retirement savings investment strategies, mainly because it is an easy investment to understand. Basically, it follows 3 steps: I) Purchase of the property; II) Rent the house/apartment while valuing; III) he sells the good and buys others. After that, just repeat the process. We recommend that you get to know the main real estate investment opportunities.
4. Diversify your investments
Diversification is a strategy for those looking for security and profitability in investments. The objective is to distribute resources among different types of assets, such as investment funds, stocks, and state investments, thus reducing risks and consequently increasing the chances of return.
By investing in several assets, you are protected, as losses in one sector can be offset by gains in another. This model becomes even more effective in times of volatility, as it adapts to different economic scenarios.
For example, in periods of high inflation, safer assets, such as Treasury Direct, help protect purchasing power. In phases of economic growth, investment funds can offer more expressive returns.
The secret lies in the balance between risk and return, adjusted to the profile and financial objectives of each investor. To begin with, it is essential to choose a good broker. Some recommended options are Avenue, Fidelity Investments, and Charles Schwab.
Conclusion: Retirement savings investment strategies
Getting to retirement well requires planning and strategy. It all starts with estimating the amount you will need in retirement. Soon after, you should start investing, thinking about compound interest. In addition, we recommend that you make investments in real estate, for the reasons listed above.
Also, always remember to diversify your investments, putting all your money in just one place makes you vulnerable. On the other hand, investing diversely protects you, since when one investment is going bad, there is another with great results to compensate.
Remember that the most important thing is to act. As it has become clear, planning your financial future can be simple, as long as you act with commitment and discipline. Start as soon as possible, that way, time will be your ally.