The fear of losing money and the fear of running out of money before they die are two of the greatest concerns of senior citizens. Monitoring investments, scrutinizing possible additional investments and reinvesting wisely is key to ensuring that savings last as long as possible.
Safety of Principal
No one wants to lose money. No one likes it when their money is lost, whether misplaced, stolen or lost in the stock market or other investments. The elderly depend on their assets to fund their lifestyle. Most of their resources should be placed in safe investments as they get older. It is important to maintain a small portion in investments that will, hopefully, result in capital appreciation. The additional funds are a necessary hedge against inflation. The elderly do not have time to earn money lost as they age.
Financial Crisis and the Elderly
The financial crisis and recession experienced during the first decade of the 21st century hit retirees and those nearing retirement especially hard. Retirees depending on income from fixed income securities to supplement their revenue found their earnings disappearing as interest rates dropped to near zero. Retirement nest eggs shrunk as the stock market plunged. Younger investors have the luxury of time to recoup their losses, assess the damage caused by the lost decade and plan for the future. The elderly do not have that opportunity. A combination of diminished brokerage accounts, loss of income from interest-bearing assets, a drop in housing prices and inflation combine to create at best, a worried group of seniors, and at worst, a new class of struggling elderly. The funds remaining must be diligently and safely invested to yield the best results for the longest time without loss of principal. That is a huge task.
Completely safe investments boast the lowest returns. Certificates of deposit have zero risk of loss. Most bank deposits are insured. Treasury notes, bonds and bills are not insured but are considered very safe investments. Investment grade municipal and corporate bonds have increased risk, and therefore, offer slightly better returns. A short- or intermediate-term investment grade bond fund minimizes the risk of an investor losing money while providing much-needed income. Many companies offer specialized income-producing mutual funds and insurance products such as annuities tailored to the needs of seniors.
Seniors are often victims of investment scams. Researching investments and the companies offering investment products is the best way to avoid becoming a victim. A number of websites provide seniors with unbiased, objective investment information. Three of the best are the AARP site, the government’s Securities and Exchange Commission’s senior site, and the NASAA (North American Securities Administrators Association) site. See Resources for links.
Meryl Baer worked at a financial firm for 15 years, researching investments and writing newsletters and marketing materials. She also worked at two business schools as an English/business writing instructor, department head and placement director. Baer holds a master's degree in American studies from Pennsylvania State University and a master's degree in business administration from Robert Morris University.