When you’re in the throes of raising a family, retirement investments can take a back seat as you focus your finances on building a prosperous future for your children. It’s natural to want to provide your family with the best lifestyle you can afford at present, but you shouldn’t neglect the future of your personal finances.
Your current investment strategy determines your quality of life during retirement. Have you thought about how you manage your investments and finances on a daily basis? Good financial management is a habit not an end goal, and so is your family’s financial plan. We’re sure you want to live comfortably during your golden years and leave a lasting legacy for your family – that’s why it’s best to start investing as soon as possible.
Securing a financially sound retirement depends on the amount of money you invest, the growth rate of your investment, and the time you allow for it to multiply. The overall aim of your investment strategy should be to utilise your career and semi-retired years to build residual income in business, real estate, or paper assets so your passive income exceeds your living expenses once you retire. Here are three different investment options to help you build a financially fruitful retirement for you and your family:
The Pension Plan
Most people start off their investment strategy with a pension plan before expanding their financial portfolio to include other assets. Pension plans are usually tax exempt and require your employer to make a contribution towards a pool of funds reserved for your benefit post-retirement.
If you already have a pension plan in place, find out if there’s a voluntary investment component that allows you to deposit part of your monthly income into an investment scheme. If you’re lucky, your employer might even match a portion of your annual contributions up to a certain percentage.
An annuity is a contract between you and a 3rd party—usually an insurance company—whereby in exchange for making a lump sum payment the company promises to provide 1 of 4 things; income for a period of time, asset growth, death, or long-term care benefits. Correctly used annuities will give you a stable source of monthly, quarterly, annual, or even a lump sum of income during retirement, and the bonus is that it’s possible to defer taxes.
Individual Retirement Accounts (IRAs)
There are three types of IRAs you can include in your investment strategy: stocks, bonds, and real assets. If you have enough capital, we’d recommend having an extensive financial portfolio and splitting your investments across different IRAs to create diversified income reducing investment risk. With IRAs, large sums of money can grow tax-free, which you can use at later to afford things like your child’s tertiary education.
One IRA investment strategy is to play the stock market and buy company shares. Stocks represent a claim on a business’s assets and earnings, and as you acquire more stock, your ownership in a company increases.
Alternatively, you can opt for a bond, which means taking out an extended loan for a particular period at a variable or fixed interest rate. Corporates and financial institutions issue bonds as IOUs, providing you with funds to finance long-term investments.
The third kind of IRA is real assets, such as property, which require more capital but begets greater returns. Real estate is a productive asset and financial legacy builder. For example, if you buy prime property in a popular tourist destination like Spain, you’re purchasing a family holiday house and a possible retirement home. If rentals are in high demand, can get tenants to pay off your mortgage. You’ll also have the advantage of leaving it to your children and allowing them to decide if they want to continue to earn rental income or make money selling the property.
Every family is unique, and so is their investment strategy. To secure your family’s financial stability, you’ll need to re-adjust your budget, think about life insurance, and how to save effectively. For expert tips on skillful money management, you can download our ebook, New Parents’ Guide to Finance, to learn about wise budgeting and smart saving. If you’re eager to include real estate that generates guaranteed rental income in your financial plan then consider our in demand Spanish property for sale in Costa Blanca.