The Most Stable Retirement Investments in 2020

Posted on: March 9, 2020 |

When you’re wondering about retirement investments—especially if you’re nearing retirement age—the stakes are high. You want to be comfortable, and worry-free. However, investing can quickly become complicated. One of the best ways to avoid the complexity of investing is to utilize historically-stable investments. Another way is to choose investments that you have more involvement in. In our list of the most stable retirement investments in 2020, we’ll cover both of these.  Ice vending is one way to invest in a stable business that will generate income in retirement with minimal risk.

The Most Stable Retirement Investments in 2020

Stable Investments You Control 

Many investors are understandably suspicious of the finance industry because it’s difficult to understand how it works. Investors often hand their money over to a wealth advisor, fund manager, or another firm with a set of directions, but how the money grows (or doesn’t) isn’t understood. However, some more stable retirement investments are more transparent and require your direction and control.

Independent Small Business

The basis of any stable retirement investment is one’s ability to predict demand; if demand for a product, service, or industry increases or remains stable, the investment will too. However, this process can be upset by mismanagement. When you operate a small business with stable demand, you can be sure mismanagement does not affect your investment. Many independent businesses require relatively little time and effort, and will still allow you to work at your regular job. When you retire, you can continue to operate the business to keep earning money after retirement, designate a manager, or sell to someone else. The ideal independent business allows you to monitor it remotely or work with a trusted employee, with minimal inventory or maintenance, and it involves something easy or something you enjoy. Some of these include making and selling online courses, vending machine businesses, affiliate marketing, or licensing photos. 

Real Estate 

Though there have been some exceptions, real property is a historically stable retirement investment for several reasons. The first and most obvious is that you have a tangible asset to use as you see fit. The second is, with the right location, the demand—and therefore the value—of your property will increase.  Finally, you can use real estate for income. Even if there are no buildings on the property, there are many business opportunities for landowners. 

Partnership 

If you don’t have the time to run a business, manage a property full-time, or don’t have the capital to make a full investment, consider working with one or more partners. If you and a friend or family member are both interested in low-maintenance businesses, you can share the work and the profit. Or, if you have one piece of the puzzle, such as knowledge, time, or capital, the right partner(s) can help you fill in the rest. Create a strong legal document from the start and ensure all parties understand their duties, payment, and how to exit the partnership. This will help to prevent any unpleasant legal battles in the future. 

Business Advisor

If you have experience in a particular industry or in managing a company in general, consider acting as a business advisor to a startup. Depending on your contractual arrangements with the business, you may earn a stake in the company which can yield dividends or payout later on. 

Stable Investments in Finance

You may not want to invest your time and money into your retirement investments, and not be comfortable with complex financial instruments either. These are some of the most stable retirement investments in 2020, which can dramatically reduce your risk while still allowing you to earn money. 

Certificate of Deposit (CDs) 

CDs from banks insured by the FDIC are highly stable investments. This means, even if the bank folds, your money is covered by the government. You’re also guaranteed a particular rate and time, so your investment isn’t susceptible to stock market fluctuations. There are many different types of CDs and many different payment arrangements. Generally, the longer the CD term and the larger the initial investment, the better the interest rate. 

If you’re not comfortable putting your money away long-term, consider a CD ladder arrangement. With this, you put chunks of your investment in different CDs that mature at different times. This way, you can have a CD maturing annually, or even every 6 months. You can roll the amount over into a new CD if you don’t need the funds, or take it out if you’re strapped for cash. You’ll be saving and earning money towards retirement, while still making funds available.  

Index Fund

The stock market is one of the best ways to earn high-interest returns, but many investors are uncomfortable with market fluctuations. Watching the stock market go up and down daily, without cause or reason, is an understandable cause for concern.  An index fund is a good solution because it allows you to invest in the stock market and earn high returns while reducing risk as much as possible. 

Index funds are a stable retirement investment in 2020 because of how they’re formed. An index fund is based on a larger market, like the S&P 500. These funds track with the performance of the 500 largest companies in America (or other countries). Although year-to-year performance may vary, these companies move upward over time as the economy expands. The average yield for an index fund is around 10%. However, this is a long-term average, so it isn’t recommended for less than ten years. It’s also important to not to let dramatic stock market swings sway your decisions, and remember that these swings even out over longer timelines.     

Health Savings Account (HSA) 

An HSA is a stable retirement investment for 2020 that will save on taxes, help you prepare for retirement, and even earn interest. An HSA is only available if you have a high-deductible healthcare plan, which the IRS defines as a plan with a deductible of at least $1,350 for an individual or $2,700 for a family. If you have this plan and you create an HSA, you can contribute up to $3,500 for singles or $7,000 for families (as of 2020) without paying income taxes. You can take this money out at any time to pay for qualifying medical expenses. Any money left in the account will generate interest similar to an IRA (see the next section). Once you reach 65, you can use this money for any reason without paying taxes.   

Traditional Retirement Accounts 

An IRA, Roth IRA and 401K plan are traditional retirement investments you’re probably familiar with. These are stable retirement investments that you can set up yourself, or your employer may arrange them. Any of these accounts may be based on mutual funds; groups of stocks, bonds, and other securities. A mutual fund is similar to an index fund, except it’s maintained by fund managers, to generate higher returns than indexed funds. Roth IRAs and IRA retirement accounts can be arranged through banks and credit unions, however, these function more like CDs instead of hedge funds. Roth IRAs, IRAs, and 401K accounts have different tax implications as well; with a regular IRA or 401K, you don’t pay taxes until you retire and take the money out, Roth IRA funds are taxed as you save them, not when you take them out. 

With some knowledge of stable retirement investments in 2020, you can make the best decision based on your lifestyle, retirement plans, current age, and the level of risk that you’re comfortable with.