Five Investment Terms Every Retiree Should Know By Heart

Increase your knowledge and profit more from your savings.

If you’re quickly approaching retirement age, congratulations! You’ve worked hard throughout your lifetime, saved and invested the way you should have, and now get to take some time out for yourself to do the things you truly enjoy. It goes without saying that your ability to earn, save, and invest has served you well. In fact, if it wasn’t for your understanding of the investment process, you’d likely not know everything you needed to know to make sound financial decisions for yourself and your family.

Here are five investment terms every retiree should know by heart:

  • Fiduciary. The financial professionals that you invest with must work within the confines of your best interests. They cannot give advice with the intent of increasing their own profits. Working with a financial advisor who is transparent in the way they handle your investments is key. That way, you can diversify your portfolio and max out profits on the things you’ve chosen to invest in.
  • Expense Load. This term refers to the costs of buying and maintaining an investment. Knowing precisely what price you’ll pay yearly for the investments you’ve put money into helps you avoid high expenses. It allows you to evaluate your investment and its performance before profitability goes by the wayside.
  • The 4% Rule. A misunderstood term, it does not refer to an equation. Instead, it has to do with withdrawing from a retirement portfolio to the tune of 4%, then accounting for inflation in the future by making an adjustment, and sustaining withdrawals for three decades using stocks and bonds built into the portfolio. Some experts think that it’s an antiquated process because human lifespans have increased.
  • Required Minimum Distributions (RMDs). Once you’re past the age of 70, you can count on the withdrawals to occur on a monthly basis. Any monies that were tax-deferred now incur taxes. A financial advisor can better explain the process but it typically applies to 401K savings plans and IRAs.
  • Risk Tolerance and Risk Capacity. Knowing how much risk you can take without it negatively affecting your lifestyle is key. That way, you can determine which types of investments you want to make. The first term refers to your ability to handle losses while the second has to do with how much risk you need to take in order to grow your savings.

Knowing these terms well can help you decide which steps to take in the end stages of your working years. You’ll be able to protect your investments and know that they will sustain you throughout the years of your retirement. You have a greater idea of the risk and reward of investing in certain products, services, and companies.

Now that you’ve reached the end stages of employment, it’s time to make sure you have the money needed for the latter years of your life. Red Rock Financial helps you make wise investment decisions concerning your savings so you get as much from your hard-earned dollars as possible. Best of all, when you invest in precious metals, you come out on top because the value of gold and silver remains high.