Majority of Americans have social security trust funds as an integral part of their investment plans. Investors can include other types of investments to supplement social security funds to accumulate wealth. Here is a list of 5 investments that they can include in their portfolio:
1. Invest in annuities
An annuity is an investment contract where you pay a single lump- sum amount of money called a premium up front or through flexible premium payments over time into a financial institution and in exchange, you get paid a regular income slowly over a period of time. It is a sort of hybrid between investing and life insurance. The payment of the income can start now which is an immediate annuity or in the future which is called deferred annuity. It allows you to convert a portion of your retirement funds into a stream of guaranteed constant income payments for life. For example, you can invest $100,000 up front in exchange for $10,000 annually in payouts. It is one of the safest investment plans where providers are required by state law to protect their outstanding annuity contracts with cash reserves on a dollar for dollar basis.
2. Invest in a high-yield savings account
If you keep your savings in a short-term savings accounts and certificates of deposit (CD), you earn income from the interest rates offered but the rates are very small. There are financial institutions that have better terms and interests if you commit your savings to a larger CD like a five year CD offer, for example, the Jumbo CDs. Whereas the one year CD offers around 1.5% to 1.7% in annual interest, the five years one would offer as much as 2.3% per year.
3. Invest in bonds
Bonds are debts that you lend to a corporate entity or to the government and they pay you back the principal amount plus the interest. The Treasury bonds are issued by the federal government to finance its budget deficits and are offered at lower rates but with no chance of failure to repay you back or rather zero risks of default. The Treasury bond yields on average 2.4% annually. A corporate bond, on the other hand, has better rates to compensate for the likelihood of not getting repaid or higher risk of default. The corporate bond yield is better and can be more than 5.5% annually.
4. Invest in dividend stocks
Invest in dividend stocks as they guarantee investors steady cash dividend payouts and then offer them an opportunity to reinvest the cash dividends to purchase of additional shares or fractional shares of stock on the dividend payment date. This can be a brilliant way to take advantage of the compounding potential because instead of receiving your quarterly dividends, the brokerage firm or the transfer agent plows the payouts directly towards the purchase of additional shares of stock.
5. Alternative investment
Another way to accumulate wealth is through investing in alternative investments like real estate, commodities, cryptocurrency, Art, Wine, peer to peer loans, franchising, comic book, and Hedge funds among others. Most alternative investments have low liquidity, minimum investments and fee structures compared to mutual funds and ETFs. Real estate is an investment that appreciates with time and thus offers an excellent form of investment.