While baby boomers may prefer the comfort of traditional savings accounts and certificates of deposit (CDs), financial experts are urging retirees to embrace investments they might otherwise avoid.
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Despite market volatility concerns, these strategic moves could be crucial for protecting purchasing power and ensuring retirement funds last.
Retirees need at least some stocks in their portfolios to ensure they don’t run out of money later, according to CNBC.
While the instinct is to flee to bonds and cash, maintaining 30% to 40% stock allocation can help combat inflation over a 20-30-year retirement. Consider broad market ETFs or dividend-paying bluechips for steady growth without the stress of individual stock picking.
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With inflation eroding purchasing power, investment options may include dividend-paying stocks, real estate investment trusts (REITs), inflation-protected bonds and Treasury inflation-protected securities (TIPS), according to Kiplinger. TIPS adjust their principal value based on inflation, making them essential protection against rising costs, even if their returns seem modest compared to traditional bonds.
Many boomers are house-rich but hesitant about real estate investments beyond their primary residence. REITs offer exposure to commercial real estate, healthcare properties and industrial facilities without the headaches of direct ownership. They typically provide higher dividend yields than traditional stocks while offering inflation protection.
Market declines can threaten retirees’ income; investments like TIPS, annuities and high-yield savings accounts can protect principal, according to U.S. News. While these won’t make you rich, they’re offering competitive rates in 2025 and provide liquidity for emergencies — something many retirees overlook in favor of longer-term certificates of deposit (CDs).
Each of the Target Retirement Funds invests in Vanguard’s broadest index funds, giving you access to thousands of U.S. and international stocks and bonds, according to Vanguard. Many boomers abandon these after retirement, but target-date funds designed for retirees automatically adjust allocations as you age, taking the guesswork out of rebalancing.