Investment options for Seniors

Communicating investment options to seniors can be difficult because of the perception surrounding investment at a late age. Primarily, the perception is that investment is a long-term tactic to generate further income—not a short-term option. And seniors worry that if they try to invest in stocks, they run a huge risk of losing a lot. Many seniors today have been saving for a good portion of their lives—and they expect Social Security—so they’re less likely to think about investment opportunities later in life.

Investment Options

The Process is Threefold:● Communicate to seniors that it’s not too late to make money

through investments during their lifetime; there are investments that can pay off within three to five years.

● Communicate the idea that they can use their nest egg now to make investments that will help their children, successors, and trusts even more if the right investments are made.

● If they don’t think they have the money for investment, there are steps they can take to change that, including selling their life insurance policy.

The ProcessAs we discuss further options, each one will fall into one of these categories. Because, in the end, your goal is to show seniors how to be responsible with their finances in both how they spend it now and where they invest it for the future.

Real Estate Investment Trusts

Real Estate Investment TrustsA Real Estate Investment Trust, or REIT, is a way of investing in income-producing real estate without tying up money long-term. Investing in a REIT allows for the opportunity to invest in real estate by purchasing stock. The investor shares a portion of the income generated by the real estate that they invest in and can buy and sell their shares as easily as they can with any stock.

Real Estate Investment TrustsREITs allow for a return on real estate without having to buy, own, or manage properties. REITs can be found on major stock exchange markets, but investors can also consider options like public, non-listed, and private REITs. These opportunities will commonly come in the form of Mortgage REITs or Equity REITS. Mortgage REITs can be through both commercial and residential properties. With a Mortgage REIT, an investor is purchasing all or a portion of the mortgage or mortgage securities of a property.

Equity REITs work with properties that accrue income through collection of rent and the sales of the properties.

On average, REITs perform better than the S&P, Dow Jones Industrial, and NASDAQ Composite. However, there is always the chance that they’ll be outperformed by other investing methods such as high-risk investment—but those are less likely to produce.

Real Estate Investment Trusts

Bonds

BondsAccording to RidgeWorth Investments, “Short-term bonds, best defined as fixed-income products that mature within one to three years, can be an attractive solution given today’s historically low yields and potential for rising interest rates.” While in the past few years short-term bonds have been reasonably well recommended, some investors advise against short-term bonds and instead advocate for longer investment periods. But if your client is a senior, they might not want to.

BondsSeniors may need their money in a year or two, so it’s pointless for them to get wrapped up in an intermediate or long-term bond situation. Short-term bonds also allow for seniors to move their money around easily to other investment opportunities.

BondsShort-term bonds aren’t right for everyone, and if a person has a choice, they might be better served by a longer-term investment. However, if they want to invest money for a year or two and then use it in a different way, short-term bonds are generally a good option. If a person has short-term liabilities, it means they should purchase short-term bonds.

InflationWhen a person is near retirement age, it’s not the time to make risky investments. Having said that, they can’t be too conservative. Sometimes, if investments are too conservative and their interest rates are too low, they can actually lose money. Some interest rates on savings accounts and CDs are so low that, after inflation, they won’t actually make any money. This is the risk of investing too conservatively and not understanding the market completely.

InflationWhile a conservative investment sounds good in theory, you need to be the authority on the increase in inflation, the rate of incremental growth of an investment, and the age and health of the investor.

InflationEncourage clients to invest in things that are guaranteed or almost guaranteed to get a good return. The years they have to make riskier decisions are behind them, but that doesn’t mean they are without options. There are more ways to invest than thinking about risky versus conservative investments.

Selling Your Life Insurance

Selling Your Life Insurance If a senior doesn’t have the time or money to invest in something like stocks, REITs, or short-term bonds, they can consider selling their life insurance policy. The life settlement market, which is the market for people interested in selling their life insurance policies, has been around for over 20 years. While it is a thriving investment market, many people are unaware that they can sell their life insurance policy and get the money they need for retirement.

Selling Your Life InsuranceLife settlements happen for both permanent and term policies, which allows for more opportunities across the board. Term policies are only eligible if they are convertible, which means they can be converted from the term policy to a permanent, universal life, or whole-life insurance policy.

Selling Your Life InsuranceMost people consider life insurance policies to be something they won’t see any return on. The policy is there in the event something happens to them, but what those people don’t know is that if they qualify for the life settlement market, they can sell their policy and get a return on their investment that they would otherwise miss out on. While this may sound like a wonderful opportunity for everybody, there is a strict qualification process one must go through in order to sell.

Communicating Expertise As an advisor, your clients rely on you to be an expert on these matters and communicate to seniors in a way that shows them every choice they have. You can encourage them if you think there’s an option that’s most beneficial to them depending on age and health and previous investment. More so, you can provide them with the pros and cons of each of their investment opportunities. And that’s key: to communicate to them that they still have investment opportunities—but now their options are simply different than when they were younger.