Fixed Income Investments for Retirees

Many seniors are turning towards fixed income investments to give them more security during their golden years.

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People who live on a fixed income can often feel like money is always tight. This is especially true during retirement years.

Most of the time fixed income investing often takes a backseat in our thoughts. But if you’re approaching retirement, you should think more seriously about fixed income investing opportunities.

At this point in life, preservation of capital with a promised income stream becomes your important goal.  Trust me, you don’t want to feel trapped because you didn’t prepare ahead of time.

Fixed-income investments can be your ticket to a worry-free retirement.  It will help you grow your wealth consistently, and you will never have to sell assets to generate cash.

Today, fixed-income funds are attracting more and more investors since the senior population is growing rapidly.  If you want to understand how fixed-income funds can boost your retirement benefits, continue reading below.

How Fixed Income Works

You need to know what fixed income is because your retirement might depend on it one day. 

When you’re working, there’s always a probability of your salary increasing, therefore increasing your overall wealth.

However, when you’re retired you only live on a fixed amount of resources. You won’t have any additional source of income, except for your investment returns.

Many people don’t earn much in investment returns, that’s why they end up drawing down their assets.

Retirement for most people means living on a fixed income.  Fixed income provides them with a continuous flow of money, meaning they can stay within their means. Also, it means they can have surplus money for discretionary spending.

Usually, fixed-income investments are designed for retirees who require income to settle their monthly expenses. Retirees usually receive a specific set of money monthly from their fixed income funds.  But weekly, quarterly, and annual distribution options are also available.

When investing in fixed-income funds, it’s wise to spread your investment. This way you can reduce your potential risks and increase your flow of cash.

Thankfully, most fixed-income investments allow you to automatically reinvest a certain portion of your return to keep your funds flourishing and to increase monthly income over time.

But just like any other form of investment, it’s important to be careful when selecting where to invest your hard earned cash. You don’t want to invest where you’ll experience unnecessarily high risk.

What Fixed Income Funds Are Available?

Fixed income funds come in many shapes and sizes. The fixed-income funds you’ll select depends on your financial needs. You can purchase and manage your investment or you can opt for managed funds or ETFs.

 Let’s look at the seven basic types of fixed income funds:

Treasury Bonds

They’re bonds sold by the U.S treasury. They offer minimal risk and low returns. 

Government and agency bonds

Government bonds often offered by national governments are considered low-risk investments because the issuing government backs them up. But in developing markets, the risks can be higher.

Municipal bonds

Municipal bonds can be thought of as loans that investors offer the local government or municipals.  They not only come with lower risk, but investors benefit from tax exemptions.

Corporate bonds

These bonds are usually offered by companies seeking capital to meet their needs. In return, Investors receive a pre-established number of interest payments either as a variable or fixed rate: These bonds might offer high returns but come with a high degree of risk.

Mortgage-backed securities

Mortgage-backed securities are just like bonds only that it comprises mortgage loans bought from banks. They can offer you significant returns.

Certificate of deposit

Certificate of deposit is easily accessible through fixed-income investments offered by banks and credit unions. Both their returns are low, but also the risk is very low.

Preferred stock                                                                                                                                

Unlike common stock, preferred stock off has high dividends and asset distribution. Preferred stock form corporations can later change to common stock after a certain period.

Why Fixed-Income Investments Are a Smart Choice

Fixed-income investment is perfect for retirees or individuals who are about to retire because:

  • They receive a steady fixed income that allows them to plan for their future while avoiding touching their capital base during hard times.
  • Investing in fixed-income funds like municipal bonds can exempt them from taxation.
  • Most fixed-income options, like certificates of deposit and government bonds, offer investors the lowest risk possible.
  • Fixed income funds offer individuals an extra degree of diversification which protects their capital when the market crashes.

How to find the Best Fixed Income Funds?

Fixed-income investment offers many benefits to people, whether retired or not.   But before investing in fixed-income funds, ensure you’ve conducted enough research to find the right fixed-income options.

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As we said earlier you don’t want to invest in high-risk investments since they can cause significant losses. 

When you’re well informed you can enjoy high returns with low risks. You can also find a reliable financial advisor who can help you find the right fixed-income investment to add to your portfolio.

If you make the right investment not only will you secure your retirement income but also preserve your capital.