Do you have enough retirement funds? Here are some ignored or less commonly known sources of retirement funds for aspiring retirees.
In this article:
- Get Solid Financial “Footing”: Real Estate Investment Trust
- Do What You Love: Engage with Part-Time Work
- Retirement Income: Annuities
- The Often Ignored Retirement Plans: Roth IRA and 401(K)
- Retirement Income Funds: Pensions
- Have a Finger in Every Pie: Own or Operate a Business
- A House Is Not Just a Home: Home Ownership as a Source of Income
7 Interesting Alternative Retirement Funds Investors Should Not Disregard
1. Get Solid Financial “Footing”: Real Estate Investment Trust
Owning a prime piece of land can generate retirement income to reach investment objectives. However, owning land directly can be quite expensive.
Get the best of both worlds through investing in a Real Estate Investment Trust (REIT).
What is Real Estate Investment Trust? A REIT share refers to part ownership of an investment LLP, which is a company that engages primarily in purchasing, developing, and operating real estate properties and assets that produce income.
Generally, a REIT invests in commercial and residential rental properties for projects like hotels, hospitals, strip malls, and warehouses. Some delve into practical and unconventional investments, like retirement centers, forests, and farms.
Think of a REIT like a mutual fund but usually without a managing fee, since it grants direct ownership, unlike a mutual fund.
Where can you buy a REIT?
- Some REIT shares are publicly traded so investors can buy them like an index fund or mutual fund.
- Other investors prefer a more private management style and opt to not have the REIT list in a public exchange.
- Lastly, some groups of investors pool their retirement money into one fund and invest in one or several properties.
An investment often overlooked by both future retirees and some investment advisers, a REIT share can provide a hopeful retiree not just passive income but also a chance to directly influence his or her retirement by managing the real estate property. A REIT can give any retiree a chance to find purpose after retirement, as skills and networks sharpen and polish with more experience.
2. Do What You Love: Engage With Part-Time Work
Some retirees prefer spending their time on a cruise, while others prefer to take care of grandkids and play bridge every week. Others hope to leave a legacy and etch their names and memories in the hearts of many.
One way to leave a lasting memory is to work part-time, usually with a charity or a non-profit organization. Pursuing your hobbies and interests can also lead to a rich and fulfilling retirement.
By working part-time, a retiree not only gets another source of retirement income funds but also stimulation and even meaning.
Retirees add years to their life and life to their years by continually giving value to the world. The world reciprocates by giving back as well.
A life of comfort sounds lovely at first until boredom creeps up. Adding an activity to your retirement plan can ward off boredom and diversify income by providing an avenue that can make money.
Whether you get fulfillment through a charity, hobby, or a side gig, a retiree can get rich holistically through work that provides value and dignity.
3. Retirement Income: Annuities
Another investment that retirees severely underestimate is an annuity plan.
Think of an annuity as the life insurance for those who are still alive. The investment company or insurer gives monthly, quarterly, or yearly income while the insured or policyholder is still alive.
Some have additional benefits like a death benefit for heirs in case the annuity plan still has money. Other benefits include an income stream keeping up with inflation, a fixed income stream, or even a variable annuity that can change income amounts.
Always ask questions about any plan or investment product to the appropriate people. Investment advisers, as well as financial salesmen, can help answer questions about what investment vehicle can serve you well.
4. The Often Ignored Retirement Plans: Roth IRA and 401(K)
Retirees usually rely on a retirement plan together with their pension as their main source of income.
These investments usually refer to employer-sponsored retirement plans but can also refer to a self-directed IRA completely owned and contributed to by a retiree.
Usually, an investor has an IRA funded by pre-tax contributions in a Traditional IRA. On the other hand, some investors may opt to invest in post-tax contributions in a Roth IRA.
That means that investors pay taxes when they withdraw from a traditional IRA. For those coming from a Roth IRA, the investor no longer pays taxes as the Roth contributions have already been taxed.
However, do note that if you only rely on your IRA, you may need to contribute religiously for many years in order to save a comfortable retirement egg.
5. Retirement Income Funds: Pensions
Some retirees have pensions on top of the Social Security benefits. Usually, a retiree qualifies if he or she stays employed by the same employer for a period of time, generally five years.
Since companies have to report pension contributions, some retirees can trace if they have properly received pensions.
One great portal for accurate pension reporting is at PBGC, the Pension Benefit Guaranty Corporation. This government agency helps you find out if there are any pensions you have not yet claimed.
6. Have a Finger in Every Pie: Own or Operate a Business
Some retirees prefer a hands-off approach to business ownership by investing in stocks, mutual funds, index funds, and other investment vehicles.
What most retirees miss out is partnering with small businesses entirely.
99% of all registered firms are small businesses according to a J.P. Morgan survey.
What’s more interesting to hear is 78% of surveyed business owners say their businesses are profitable. This comes from a 2019 small business survey of 2700 owners.
Direct partnership or shares with a small business has many perks.
- No management fees by a middleman that eat up profits
- Actual and observable records when visiting the business
- Investors usually invest in areas or industries they have the expertise, experience, or interest in. This added value can give the retiree lesser risk and anxiety as well as provide the small business insights and perspectives they may not have yet.
The synergy between the retiree and the small business creates a loop of perpetual value. You don’t need to go to the office and sit in a cubicle; investor meetings can be as formal or as casual as investors like, which is an added bonus to you as a retiree.
Of course, you should still do proper research as well as analysis to see if investing in a small business aligns with your investment objectives and retirement goals.
7. A House Is Not Just a Home: Home Ownership as a Source of Income
Another surprising investment for retirement is your house.
No, we’re not talking about renting out part of your house to a tenant, although a retiree can also do that.
Most investors probably aren’t familiar with a reverse mortgage process, which can provide retirees a stable set of income. Of course, most reverse mortgage plans stipulate that the retiree lives in the house.
Some retirees can also opt for a simpler and smaller house. A retiree can rent out his or her house and rent a smaller residence to cut down the cost and optimize income.
The earlier you think about and execute your retirement plan, the higher the chances of reaching your retirement goals.
In fact, I am also looking for other sources of retirement funds not just for myself but also for my family and friends. If you have any experience or insight into owning a small business or managing some real estate assets, I’d love to hear about it in the comments section below!
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