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Non-Traditional Investing Advice for Boomers

Life After Bonds: Non-Traditional Investing Advice for Boomers

Supporting Longevity in the Long Term

People are living longer than ever before in history. Thanks to advancements in health care and an ever-increasing focus on wellness, many are living long enough to watch their great-grandchildren grow up. While this is great news, it means that people now need more funds than they ever anticipated to retire comfortably. Bonds were once considered to be the way to go for cautious investors, but non-traditional investing advice for boomers is starting to change long-held ways planning for the future.

Half of the world’s 55-74 year-olds have not yet saved enough for a comfortable retirement

Baby boomers are now reaching the age of retirement and the numbers are in. Data from Legg Mason’s 2017 Global Investment Survey revealed that “half of the world’s 55-74 year-olds have not yet saved enough for a comfortable retirement, despite the fact that they have reached or are quickly approaching retirement age.”

Many must resort to pinching pennies. Countless boomers do not have enough in their retirement savings to travel, pursue hobbies or splurge on their grandkids. Some do not even have enough saved to meet their own basic needs. What’s the solution?

Is Recommending Bonds Good Enough Investing Advice for Boomers?

Traditionally, most investing advice for boomers leading up to retirement includes investing in government bonds. Bonds are a safe, conservative investment. Bonds almost ensure that the investment is protected. Unfortunately, they don’t consider inflation, and there are other disadvantages.

Mad Money host Jim Cramer spoke with CNBC about bonds. He explained that, “When you, either in your 401(k) or your IRA or just your discretionary investing account, put money into things like Treasury bonds … you’re effectively taking that money off the table. You’re saying, this money — I’m not going to use it to generate more wealth, I just want to keep it safe.” He further explained that there is a point where “prudence becomes recklessness.”

Boomers re-examining their current retirement plan for future needs have many options to supplement bonds.

What’s a Boomer to do?

Baby boomers nearing retirement age should rethink their investment strategies when it comes to bonds. They should consider more aggressive approaches. Why? Measured risk in investments will help ensure that sufficient funds are on hand during the retirement years.

Before modifying any current investments, Matt Carey of Forbes uggests obtaining an up to date retirement income number. Carey recommends Blackrock’s CoRI index retirement calculator. The CoRI calculator is easy to use and it considers bond and annuity prices in its estimate.

Measured risk in investments will help ensure that sufficient funds are on hand during the retirement years.

Armed with a current retirement income number, boomers should explore nontraditional investment options:

1. Adding risk to a stock portfolio? Research and consult.

According to the Huffington Post, aggressive and conservative investments should be balanced at 60% stocks and 40% bonds, with declining stock holdings as retirement approaches. Jim Cramer’s recommendations are more specific. He suggests that for those in their 50s, bonds should make up 30% to 40% of the investment portfolio. For those in their 60s, Cramer notes that only 40% to 50% of the portfolio should consist of bonds.

Coming up short for retirement but not yet retired? It may be necessary to add some measured risk to the stock portfolio. Be sure to consult a variety of reputable online resources for advice when considering changes. It’s also a good idea to seek the advice of a trusted and well-established financial advisor. [Editor’s Note: Check out the Financial Poise webinar, “Basic Investment Principles 101 From Asset Allocations to Zero Coupon Bonds” to get investing basics, start to finish.]

2. Real estate offers tax advantages and a steady cash flow!

Boomers exploring nontraditional investments may not need to travel too far out of their comfort zones. Michael Episcope, co-CEO of Origin Investments, recommends real estate in his investing advice for boomers. He spoke to MSN Money about real estate as an excellent alternate investment for older workers. Episcope explains that “real estate equity funds offer tax advantages through depreciation, while real estate debt funds can deliver steady cash flow with dividends that are distributed on a specific schedule.” Another advantage is that “real estate values remain consistent and are not linked to the value of the broader stock market.

3. Investment in private equity for retirees: Is this an option?

Definitely! Pensco Trust blogger Christopher Orr explains that investors can invest in private equity with their IRAs, either through a fund or directly into a company. Orr further noted that there is a choice between private equity investments with a single focus and those with a commingled focus. [Editor’s Note: For more private equity retirement investment education, read “Six Ways Private Equity Can Play a Role in Retirement Plans.]

Private equity investments also offer potential tax advantages, according to Orr.  Yet, Orr also notes that “certain private equity investments can produce …unrelated business taxable income.” It is key to review this investment strategy with a tax advisor for any potential tax consequences. 

Boomers exploring nontraditional investments may not need to travel too far out of their comfort zones

4. Not ready to fully retire? Stay in the game!

Just as people remain physically healthy for longer, their mental acuity also remains vibrant. Some boomers aren’t ready to be relegated to the investment class when they still see themselves as the “inventing class,” according to Forbes. They may revisit an aspect of a previous business that they wish to pursue — or they may go off in another direction entirely. Is there a specialized personal interest or hobby that can be turned into a business?

This author’s Kansas-born “boomer” uncle did just that. “Uncle Tim” melded together his interest in cutting-edge drone technology and the needs of corporate farm owners and created a viable business. He was able to do this by leveraging his previously unused photography degree and his post-retirement interest in drones! [Editor’s Note: Find out here: Should you consider your retirement now?]

Bonds and other safe investments remain good options for those nearing retirement age. However, they cannot be relied upon to completely finance the Golden Years. As retirement approaches, investing outside of the box may provide boomers with the financial means they need to live out their post-retirement years as they wish.

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About Cristina Nolan

Cristina Nolan, Director of Webinar Services at Financial Poise, earned her law degree in 1997. Cristina has worked in online education since 2004 and has significant experience in the design, development and execution of online curriculum at the college and graduate school level. She is also an experienced legal editor. Courses she has taught include…

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