In retirement you want to enjoy life without having to worry about finances. It is important to invest your money carefully.
Whether it’s a big trip, a new car or an age-appropriate renovation of your own house – most people still want to fulfill their wishes even in retirement. Depending on your initial financial situation and willingness to take risks, different forms of investment are conceivable. We’ll show you how to find the most suitable one for you.
First of all, this applies to everyone: Even in retirement, nothing can be done about financial matters without you getting an overview of your situation. For most people, their regular income is likely to be lower than during working life – at least if you only receive the statutory pension.
However, those who had the opportunity to make provisions earlier now benefit from additional payments – for example from a company or private pension plan. In some cases, these can completely or at least partially close the pension gap.
You are in a particularly good position if you have already built up significant assets before you retire through investments in stocks, funds or real estate. But even if, for example, you receive a comparatively large sum from a life insurance or private pension insurance, your investment options improve.
However, none of this may apply to you and the statutory pension will remain the case. Whatever your case, next, examine your spending. Are income and assets sufficient to cover current and future expenses?
If this is not the case, you should look for savings potential. For example, if you still have to pay off a home loan, your bank may talk to you and reduce the monthly payments. Some insurances are also unnecessary in retirement – such as occupational disability insurance. Other tariffs can at least be changed: If you drive significantly less, this can save you money on car insurance.
If you still don’t have enough money to live on, you should check whether you can receive subsidies from the state. Read here what you can do if your pension is not enough.
However, if you have money left over, there is almost nothing standing in the way of investing. Unless you have not yet created an emergency reserve. Then the first step is to build up this cash reserve. The rule of thumb for the amount is three months’ income – or in your case, three monthly pension income. You should invest the money in a current account. The interest rates are not the highest there, but the money remains immediately available. Read here which banks are currently offering the highest interest rates.
Once you have your emergency fund together, there is only one hurdle left: do loans have to be serviced? If the interest is higher than what you could earn with an investment, you should give priority to repaying the loan. With real estate loans there is usually the option of making special repayments.
If you have a larger amount of money, you can use it. Please note, however, that a so-called prepayment penalty could be possible if you have enough money available that you can repay the loan in full before the fixed interest rate expires. Because some contracts incur additional costs.
If you are debt-free, you can finally get down to business: investing money as a pensioner. Most people would probably like to have everything at once: security, high returns and access to money at any time. But such a facility does not exist.
If you want to be on the safe side, you will inevitably have to accept a loss of returns, and if you want to make a particularly big deal out of your money, you have to accept the risk of losses and go without your money for a longer period of time. Align your investments based on what goal is most important to you.
If you are saving for a larger purchase or investment that can wait a few years, fixed-term deposits are a secure basis for your savings. This means you secure a fixed interest rate for a fixed term – for example one or two years – which is significantly higher than on a current account and usually also higher than on a current account. With a fixed-term deposit, you benefit from stable interest rates and know right from the start of investing what you will receive in terms of returns over time. You can read more about the fixed-term deposit account here.
