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Senior Retirement Tips :: Safe Investing
Safe Investing: Safe and Low-Risk Investing for Retirement
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Safe investing? Is there such a thing? Unfortunately, there’s no such thing as totally safe and risk-free investing.
But, barring any worldwide financial catastrophes or global disasters, there are a number of safe investing options that are 99.9% risk free or at least very low risk. So, what are they?
The TFSA (Tax Free Savings Account)
The Tax Free Savings Account is only available to Canadians, but it’s a new initiative for the 2009 year that lets Canadians save up to $5000 per year ($10,000 if you’re nearing retirement) without having to pay taxes on their earned interest.
It’s an initiative designed to encourage Canadians to save money even in small amounts.
Another great aspect is that the amounts can be rolled over. So, if you’re 18 and not able to stash any of your allowed $5000 into a TFSA, you could turn around and invest a whopping $110,000 when you’re 30.
Of course, like all “safe” investing, the returns on most Tax Free Savings Accounts are small and comparable to other high-yield savings accounts with interest rates like 1.5 up to 3%.
But, since they’re low-risk and the earned interest isn’t taxed, they’re a great place to stash funds.
CDs (Certificates of Deposit) or GICs (Guaranteed Investment Certificates)
In the U.S., they’re called CDs or Certificates of Deposit. In Canada, they’re called GICs or Guaranteed Investment Certificates. But, they’re essentially the same thing and act in a similar way to bonds.
Investors are assured they won’t lose money on their investment, making these the pinnacle of safe investing.
In return, they promise to “lock” in their money for a specified amount of time. The return offered on a CD or GIC is related to the amount invested and the length of the investment.
For example, a higher investment over a certain amount threshold (like $10,000) often earns a higher interest rate.
Also, a 5-year CD or GIC typically comes with a higher interest rate than a 6-month or 1-year CD or GIC.
Treasury Bonds
Do not confuse corporate bonds or bonds investing with Treasury Bonds. Treasury bonds are guaranteed and considered safe investing.
However, it’s possible to lose money and a lot of it with corporate bonds (particularly with what are called “junk” bonds).
High Yield Savings Accounts
In the U.S. and Canada, many banks and investment firms offer high yield savings accounts that offer a higher interest rate in exchange for reduced services.
For example, by putting your money in an online account, you may have to pay high withdrawal service fees or give up branch access.
Remember, there’s no such thing as truly safe investing. However, these are some options that are almost completely risk-free and perfect for those nearing retirement and looking to minimize risk in their portfolio.
See also:
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SeniorRetireTips.com :: Safe Investing