Why Stocks Are A Good Choice for Retirement – By Andrew Gray

By rotide
Created 16/10/2018 - 10:45

While some financial planners will tell you that it is better to look at fixed assets heading into retirement, there is a strong case to be made for going the stocks route. What strengths do stocks possess for retirees?

Getting Around Inflation

Regardless of how you approach retirement, you need to find a way to manage the level of inflation. People need to bear in mind that the money they have going into retirement needs to keep up with or outweigh inflation. This means that choosing an investment scheme that delivers returns is always beneficial. Investing in stocks through CFD trading using City Index [1] services is still one of the few means by which to get around inflation.

This is vital in today's age as we are living longer than we ever have. People are always going to be experiencing a rise in the cost of all their daily needs, so although stocks carry more risk than bonds they continue to carry higher returns. Some countries are also battling to pay pensions in today's age. For example, a report recently stated that the US will run out of social security funds by 2033. Personal income is therefore becoming as vital as ever.

Speaking of Bonds

A common concern for the elderly will be the perceived risk that stocks carry. As they get to the end of their careers they often take money out of stocks they own and place it in bonds, or other money market accounts, which through the ages have proved relatively stable. However, the last couple of years have shown that selling all your stocks and essentially leaving the market altogether carries a high element of risk, as bonds have taken a knock from rising rates. When this happens, stocks tend to do better. With this happening more regularly, it bodes well for the stock market. Instead of a retiree going all in with stocks and bonds it would be better to have an investment split over both stocks and bonds [2].

Taking Advantage of Dividends

There are a lot of companies that will pay a large sum of their profits out to shareholders at the end of every financial year, known as paying dividends. This extra income is great for retirees as it can be a lump sum, and in many countries does not get taxed. Of course, there could be the risk that a company stops its dividends program or has a year where it decides not to release dividends. Companies that do this also are fairly large and established, and could have limited growth, so a good strategy would be to also have stocks in companies that have scope for pleasing growth.

Maintaining a Family

It must be understood that life goes on once we retire. We cannot just sit indoors and not spend any money. Holidays, Christmas presents, and spoiling grandchildren will still take place. An income will definitely be needed to maintain the family lifestyle [3]. This is assuming that you have children, who have children themselves. If you don't have children investing in stocks also presents an opportunity for a hobby. Retirement can come with boredom, and for many investing can be quite exhilarating.

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