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Retirement investing is about making thoughtful decisions to grow your wealth over time. There’s no universal formula — the right strategy depends on your goals, timeline, and risk tolerance. Some investors prioritize generating steady income to support their lifestyle in retirement, while others focus on leaving a financial legacy for their family. Your priorities are critical to shaping your investment strategy, from how much you need to the types of accounts and assets you should consider.
If you’re trying to determine the best retirement investments, this guide will help you make an informed decision.
Investing for retirement is different for everyone. High earners may be able to save larger amounts, but even those with modest incomes can build meaningful retirement savings with tax-deferred, low-risk investment products such as 401(k)s, traditional IRAs, and qualifying annuities.
Here are four essential steps to help you save for retirement.
Start by deciding when you want to retire. Some people plan to work into their 70s, while others aim to retire before 60. Keep in mind that the earlier you retire, the more you’ll need to save. It’s also important to note that the IRS imposes a 10% penalty on withdrawals before age 59½ for most tax-advantaged retirement accounts.
Next, think about how you want to live after retirement. Many retirees aim to maintain the type of lifestyle they enjoyed during their working years. That means saving a large enough sum to last through retirement or choosing a product that provides a guaranteed income, like an annuity.
A general rule of thumb is to save between 10% and 15% of your gross annual income for retirement, but take a tailored approach to meet your unique retirement goals. Online retirement calculators can help estimate how much you’ll need and how your savings will grow over time.
Your asset mix — such as stocks, bonds, and mutual funds — should reflect your timeline and risk tolerance. Younger investors tend to favor growth-oriented assets like stocks, since they have more time to weather economic volatility. Investors nearing retirement, who may want to preserve capital, tend to prefer low-risk investments like bonds and annuities.
Certain types of accounts have tax benefits that can help you grow your retirement funds faster. Some options include 401(k)s, IRAs, and Roth IRAs. Annuities can provide guaranteed income, helping protect against market volatility and longevity risk.
One of the safest ways to mitigate risk is diversification, which involves spreading your funds across several retirement investment options. Here are some of the most common assets recommended by retirement planners.
Annuities are low-risk investments that can provide a predictable income stream in retirement. You can purchase an annuity with a lump sum payment or through installments. When the annuity matures, it pays you in regular increments, like a salary. For individuals concerned that their retirement savings won’t last, a lifetime annuity guarantees payments until death.
Target-date funds automatically adjust their asset allocation based on your expected retirement year. Early on, the asset mix will typically be more aggressive. As the target date nears, it gradually shifts to more conservative investments.
These investment vehicles offer built-in diversification by pooling money from multiple investors to purchase a wide range of securities, mitigating risk.
These investments provide income through regular dividend payments in addition to potential capital gains. Dividend-paying stocks can be a good option for investors seeking both growth and income. Bonds, particularly those issued by governments or high-quality corporations, can offer more predictable income with lower volatility.
Regardless of the investment options you select, customize your overall strategy to suit your risk tolerance and expectations. Here are five retirement investment strategies to consider.
These portfolios prioritize long-term capital appreciation. They typically include growth stocks, equity funds, and ETFs with a high return potential. This strategy is best suited for investors with a longer timeline before retirement and a higher tolerance for risk.
Designed to generate steady cash flow, income-focused portfolios include assets like bonds, dividend-paying stocks, and annuities. These investments can provide regular payouts, making this approach ideal for those nearing or already in retirement who prioritize stability over growth.
A bond ladder means purchasing bonds with staggered maturity dates, typically over one to five years. As each bond matures, you reinvest the principal into a new bond at the longest duration in the ladder, which ensures consistent liquidity and interest income. Say you invest $30,000 in three bonds ($10,000 each) and the maturity dates occur after one, two, and three years. As each bond matures, you reinvest the principal into a three-year bond. That way, you always have $30,000 invested, with $10,000 maturing yearly. Some people also use this strategy with annuities and certificates of deposit (CDs).
Dividend-paying stock investing involves building a portfolio of stocks that pay regular dividends. While dividend payments aren’t guaranteed, choosing established companies and diversifying across sectors can reduce the risk of income disruption.
Similar to a bond ladder, an annuity ladder means purchasing annuities that mature at different intervals, letting you access income at various points while minimizing surrender charges for early withdrawals. If you need funds urgently, you can either wait until the next annuity matures or withdraw from only one instrument instead of subjecting your entire savings to surrender fees.
Now that you know how to start a retirement fund and some available investments and strategies, it’s time to decide which approach is right for you. Consider the following factors.
Consider your current age and when you’d like to retire. You want to determine how much time you have to save for retirement and how long you’ll rely on those savings. Naturally, no one can predict their lifespan, so many people choose lifetime annuities to ensure income continues for as long as they live, supplementing social security, pensions, and other investments.
If you have decades until retirement, you may be more willing to ride out short-term market volatility in pursuit of long-term growth. But if you’re uncomfortable with market swings or nearing retirement, you may prefer more stable options like bonds, CDs, or fixed annuities.
Calculate all your potential sources of income during retirement, including social security, pension payments, rental income, and dividends. If you’re concerned you might not have enough retirement income to meet your needs, consider working with a financial advisor for customized advice.
This communication / article is for informational / educational purposes only.
It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice.
The Gainbridge® digital platform provides informational and educational resources intended only for self-directed purposes.
Individual licensed agents associated with Gainbridge® are available to provide customer assistance related to the application process and provide factual information on the annuity contracts, but in keeping with the self-directed nature of the Gainbridge® Digital Platform, the Gainbridge® agents will not provide insurance or investment advice.
