Diversify Retirement Savings

The Importance Of Diversifying Retirement Savings

Today, many individuals are worried how to maximize their retirement savings for their senior years. It is important to diversify your retirement savings. This is more so in the case of working folks who have limited funds at their disposal. Rising inflation, decline in buying power, and increasing expenditure have added fuel to the fire. While there are various money making opportunities such as the property market and the share market, many of them are highly risky. People not interested or able to put their hard earned money in these sectors, need to understand the importance of diversifying retirement savings. To diversify, consider investing your funds in various safer and secure sectors such as savings accounts, CDs, annuities, gold backed IRA, bonds along with higher risk and higher return sectors such as mutual funds.

The importance of diversifying retirement savings

Many folks are in a hurry when choosing investment sectors.  Often such individuals divert their retirement savings into one particular market such as the share market. If the market continues to stay in uptrend, there can be a decent profit with the passage of time. However, the problem rises when the market starts moving in the reverse direction. If the market continuously moves downward, you could lose a substantial amount of money. During the latest crash of the stock market, many investors were left with less than one percent of their investment.

You can definitely avert such a scenario by investing smartly in various sectors and diversifying your retirement savings. The best thing about diversification is you get to allot a part of your money in each sector as you wish. Depending upon your risk taking capability, you can allocate a certain amount of money in particular diversified investments. In this way, you can maintain a balance between risks and rewards. Even if one particular investment shows loss, you can get relief knowing that your remaining funds are safe in other sectors.

Above all, diversification allows you to maximize your returns on your investment if you invest prudently. You can invest about half of your money in a few safe and secure money making investments that offer certain and safe returns. Likewise, you can allocate half of your investment in different risky sectors. Here, you need to calculate the risk and reward ratio, and allocate your money accordingly for better returns.

If you manage to invest your money diligently in different sectors, you will be able to pile up substantial money till your retirement with low risks and minimum hassles. It is preferable to realize the importance of diversification and invest your money accordingly in the light of your retirement goals and risk taking capability. While there are various money making sectors, you have to stick to a few sectors that offer better and safer returns.

retirement investment options

Savings accounts

Putting your money in savings accounts is the preferred choice of most of the working individuals. The main reason why people prefer a saving account is they are not obligated to keep their money in their saving account for particular time frame and it is a liquid investment where the money is easily accessible without penalties or fees. You can deposit and withdraw your money if and when you like. If you need money for any particular emergency, you can withdraw the money immediately. In case you don’t need the money, you may keep it in your saving account.

 Zero risks, no obligation of investment, certain returns etc. are some of the reasons why people choose to keep their money in their saving accounts. The only downside of keeping your funds in savings accounts is you won’t earn much higher returns. Currently you will earn 3 to 5 percent on a savings balance. As a result, it is important to keep only a small portion of your money in the saving account so that you can manage your financial affairs when you need access to your money yet earn returns when you don’t need it.


CDs are probably the next best option preferred by working class people. The rates of returns are comparatively higher than a saving account. However, your investment will stay locked for a certain time period. During this period, you can’t withdraw your money.

Should you decide to withdraw the money, you will have to pay certain charges, which is not the case with saving accounts. In case you keep your money in the CDs for a particular time period without needing them, you can earn a bit higher returns on your investment. CDs are one of the safest investments to include in your investment portfolio to enjoy low, but consistent returns without any risks.


Annuities are another handy option to earn money from your retirement savings. The greatest thing about annuities is the owner of the investment doesn’t have any involvement in actual investment. The insurance company invests the money and renders the professional side. In simple terms, annuities allow you to earn passive income without worrying about the safety of your invested amount.

Since the insurance company is regulated, you can be certain that the company will take due care and offer its professional expertise with respect to investment and management of your funds. With the passage of time, your investment in annuities will multiply. All you need to do is choose a reputable insurance company that is well known for offering top quality investment service in order to earn higher returns on your invested funds.

Gold backed IRA

When it comes to choosing an investment that combines the element of safety and better returns, gold backed IRA turns out to be the best option. The most important thing about this investment is you can be certain that your investment will appreciate with the passage of time. No matter whether it is a boom period or recession, you will definitely earn better returns with gold backed IRA.

However, the greatest benefit of gold backed IRA is your investment is relatively safe, and will fetch higher returns throughout the year. All you have to do is choose a reputed gold IRA custodian who will invest and trade your IRA funds on your behalf. Over time, you could be able to accumulate significant wealth with gold backed investments through your IRA account.

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Creating wealth with bonds is a much better investment option compared to saving accounts and CDs. The biggest benefit of bonds is you can be certain about your returns. No matter whether the economy is in uptrend or downtrend, your investment will yield definite returns as specified in the bond agreement. However, your investment will stay locked for a set amount of time. Even so you can sell your bonds in the market in case you need money for some reasons.

On the other side, you can also buy bonds at discounted rates from sellers who are in need of money. In this way, you will make money from discounts as well as bond’s return. However, you have to be diligent with respect to the timing of purchase, the rate of return and the types of bonds you buy in order to maximize your investment returns. With the right choice of bonds, you can easily double or triple your money after a period of time.

Mutual funds

If you are interested in earning higher returns without actively participating in the market, consider mutual funds. These funds are managed by professional individuals who have years of trading experience in particular fields. You can choose gold mutual funds, silver mutual funds or property mutual funds. Each of these mutual funds specifically deals in one particular sector. In case you wish to make money from a particular sector without investing your time, consider investing in a mutual fund that specializes in that particular sector.

For instance, if you think that the gold sector will fetch better returns, you can buy gold mutual funds and earn money from gold without actually getting involved in gold trading. The professionals will trade on your behalf and help you earn significant returns on your investments. However, mutual fund investments are subject to risks. Hence, due care must be taken while selecting mutual funds. Even so, you can earn better returns from your investment if you choose correct mutual funds.

Securing your senior years through investments is the best way to ensure you have a decent sum of money to cope up with the challenges of later years. However, the key lies in getting the most out of your investment. You just can’t invest blindly in one sector and wait for a day to find out that your money has depreciated a lot or your investment has failed to fetch desirable returns to meet the challenges of your old age. This is why it is always advisable to understand the importance of diversifying retirement savings and invest wisely in multiple sectors to ensure you have substantial money in times of need.

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