Retirement Assets
The Different Types of Retirement Assets
Depending on your career plans and your health, your retirement may last as long as thirty years. To get the freedom and security you’re looking forward to, you need to have your retirement assets and retirement investments solidly in place.
We’ll take a look at the need to strike a balance between growth and stability and how to strategize around your retirement assets. But first you should have in mind the different types of retirement assets you’ll want to consider making part of your retirement income plan.
The basic categories are often defined as: stocks for retirement, retirement bonds, real estate, cash, cash equivalents (such as savings deposits, treasury bills, money market funds), commodities and other valuables (say, your Van Gogh or baseball card collection).
Successful retirement asset management requires a strategic mix of these types, in a balance that will have shift to accommodate changes in the market and changes in your plans. That mix will also have to be appropriate to where you are in your retirement plans. Retirement asset allocation that makes sense early in your career will need to be changed as you actually move into retirement.
Retirement Assets: Growth vs. Stability
When you retire, you’ll want your retirement income to fit a retirement budget that lets you pursue all the retirement activities you’ve been dreaming about, provides security against emergencies and keeps pace with retirement spending that may be affected by inflation.
To achieve this, you’ll need retirement assets that strike a balance between growth and stability. Growth is always a good thing – who wouldn’t want their nest egg to grow! – and may be necessary to meet the ongoing demands of inflation, or the unexpected demands of a health emergency. But retirement assets that offer growth – mainly retirement stocks – also come with risk.
The next section looks at retirement asset management that balances risk against retirement assets that offer stability, such as bonds and cash, or cash equivalents.
Make Sure You Have a Strategy for Your Retirement Assets
The most common categories of retirement assets are stocks, bonds and cash. Each category has its strengths and weaknesses – the volatility of stocks has certainly hit people hard in recent years, but bonds and cash, along with their comparative lack of risk, don’t offer the possibility of growth. To make the most of your retirement assets, you’ll need to strategize.
Smart retirement asset allocation requires diversifying your assets not only across categories, but within categories. Historically, the returns from these three categories of retirement assets don’t move up and down at the same time; having a diverse balance across and within them will minimize the risks over time to your retirement portfolio.
A good way to get diversity within an asset category is to look into retirement mutual funds; make sure you do the research, or get the professional help, that will insure you’re getting the best retirement asset management for the fees you’ll be paying.
Your strategy also needs to take account of where you are in your path towards retirement. Early on in your career, you have the leeway to take more risks, so weighting your assets toward stocks might make sense. As you get closer to retirement, and need to protect your retirement savings. Safer retirement assets, like bonds, cash and cash equivalents, will give you more security.
Some mutual fund companies have begun offering “lifecycle funds,” which shift from a more risky, growth oriented investment mix toward a more conservative mix of retirement assets as the fund approaches the target date you’ve chosen.
An excellent asset in planning your asset management strategy is the help of a financial professional. Whatever retirement asset allocation you decide to go with, choose your strategy and your advisor carefully – your dreams and security are at stake.
