The average American in his 50s hasn’t saved enough for retirement. In a comparative analysis of retirement savings for households between 50 and 55 and households between 56 and 61, the average savings balance stood at $124,831 and $163,577 respectively, according to statistics released by the Economic Policy Institute.
However, figures like this can be faulty especially when you don’t consider the median savings amount for these groups. They don’t tell the back story. For instance, the median savings balance for households between 50 and 55 is $8,000 while those between 56 and 61 is just $17,000, says the Motley Fool’s contributor, Maurie Backman.
Similarly, the UK is facing a pension crisis, with experts suggesting that the state pension age could be raised to 70 or higher. What does this mean for the baby boomer (who wants to retire early enough)? It means cutting back on expenses and putting money in low cost investments that offer regular returns with a guarantee to give you the lease of life you deserve when you retire.
Peer-to-Peer Lending
If you’ve ever given or received a loan from your friend or colleague, then you probably must have heard about peer-to-peer lending. A peer loan is money you lend to someone or a business over a short term period (usually three to five years) for an agreed interest rate. This is a great investment option for baby boomers as they already hold a great deal of money in cash or property.
Usually, a business that wants to borrow money will go to a peer-to-peer lending club to set up a profile. Investors log into the platform and can access the profile of the borrower. This allows them to carry out background checks on the business of the individual before making any investment decisions.
The lender can either fund the full loan or a portion of it for an agreed interest. P2P lending isn’t totally free of risks, but there are sites where you can get professional credit and investment risk information. Examples of such places are Prosper and Lending Club.
Several financial experts have recommended P2P lending as a profitable, alternative investment retirement choice for boomers. One of such people is Joseph Hogue, founder of PeerFinance101, who noted that peer loans are not correlated with stocks as they provide a safe haven from market ups and downs.
Investing in Cryptocurrencies
Crytocurrency had been considered a small interest area for investment, but not so anymore. Back in 2017, Bitcoin and other crytocurrencies like Ethereum and Monero made headlines in several international media outlets. One of the reasons for crypto’s popularity is its ability to rise in quantum value despite predictions of its demise.
There are several ways baby boomers can choose to invest in cryptocurrencies: either by investing in altcoins or buying tokens on an ICO sale.
When investing in altcoins, the first requirement is to find a healthy one that has a strong community (exchange), high liquidity rate and is supported by developers consistently improving the coin’s source code.
Similarly, you should invest in altcoins whose total market cap is more than $100mn. This is ideal as any coin that falls short of this volume indicates lack of interest from other investors. It’s also important that you check the daily volume of the altcoin: a volume of $1mn in the last 24 hours is healthy.
For an initial coin offering (ICO) sale, you merely need to invest in a project on the crypto market that is in search of funds. This is similar to buying shares in a company with an Initial Public Offering (IPO). Once you have transferred your coins, the company will send you tokens. ICO tokens may be static or dynamic, depending on the volatility of the market. If an ICO sale reaches a dynamic funding goal, the price of your tokens will skyrocket, and you can sell your coins at astronomical profit.
Index Funds
Index funds are another safe investment haven for baby boomers as they offer low operating expenses and strong returns. These types of funds are like mutual funds built to keep track of the market index. On average, the fees required to make any investment in index funds is just around 0.17%, according to a report by Morningstar.
Similarly, Paul Reudi, who is the CEO of Wealth Management Inc., recommends investing in index funds as they outperform actively managed funds. Overall, index funds are a reliable source of equity allocation for baby boomers. Here’s a list of some of the best index funds, according to GoBankingRates.
An annuity is a type of contract that is usually entered into by an investor and a third party company. According to the financial education website Investopedia, an annuity will be provided to the investor for depositing a huge sum of money with the third party, who is usually an insurance company. In return, the insurance company will promise to do four things such as providing an income to the investor for a certain period of time or for life and providing long term care benefits to the investor.
The cost of an annuity depends on its component, but overall, when used for the right purpose, an annuity will usually offer stability and security to a boomer’s financial portfolio. And, when combined with other retirement investment plans, boomers are guaranteed a meaningful retirement income that is not susceptible to the uncertainties of government retirement benefits.
Conclusion
Making any meaningful investment decision will basically depend on what problem you want your money to solve for you such as receiving income or accessing long term care benefits. However, instead of going for one type of retirement investment as explained above, the safest plan is to diversify.
Diversification enables you to reap returns on all fronts, thus, providing you the security you need to enjoy your golden years. And here, we have provided four of the best low cost investments for baby boomers. Which plans have you made for retirement? If you haven’t, it’s not too late.