If you’re living on a fixed income, you’re likely looking for a way to increase your funds each month. With only a small stream of available income, you can feel trapped financially – unless you’ve prepared ahead of time.
More and more people, especially retirees, are turning to fixed income investments. Fixed income investments are a great solution for retirees in need of more money and financial freedom. Fixed-income income investments can grow your wealth and give you consistent returns on your investment, and you won’t have to dip into your assets when you need of cash.
As the senior population grows and more people retire each day, fixed-income funds are attracting investors quickly. Here’s how fixed income funds could increase your retirement savings.
How Fixed Income Works
Fixed income is ideal for retirees: it provides you with a “paycheck,” or a regular flow of money. It’s steady income that gives you a consistent budget so you can stay within your means and have extra money for discretionary spending. Most fixed-income funds are designed for retirees who need an income to afford their monthly expenses. Fixed income funds typically pay a set amount to the investor monthly, but weekly, quarterly, or annual distributions are also options.
Investors often rely on multiple fixed-income funds. Spreading your investment into a number of funds is a great way to avoid potential risks and establish an ideal cash flow. You could, for example, keep some of your assets in a fund with variable returns while still enjoying reliable retirement income. Many fixed-income investments also let you automatically reinvest a portion of your returns to keep the fund thriving — and this could increase your monthly income in the future.
As with all investments, it’s critical to do your due diligence before deciding where to put your hard-earned money. You don’t want to increase your risks or agree to invest without knowing where you money will be.
What Fixed Income Funds Are Available?
There are a few different types of fixed-income investments, and the type you choose will depend on your financial wishes. Some people choose to buy and manage their own investments; others prefer ETFs or managed funds. Professional financial advisers can help you select and manage high-yield investments, but they also charge fees to do so.
Here are the main types of fixed-income investments you should know:
- Treasury bonds: Sold by the U.S. government, treasury bonds offer minimal risk and low returns.
- Government and agency bonds: Government bonds from advanced nations offer low risk, but risks can be higher in developing markets.
- Municipal bonds: Like the federal government, local municipalities in the U.S. issue bonds on a regular basis, which offer low risk and are exempt from income taxes.
- Corporate bonds: Companies seeking to raise capital often choose to issue bonds; these bonds yield high returns but entail a high degree of risk.
- Mortgage-backed securities: Banks often choose to sell mortgages on the open market that can yield substantial fixed income.
- Certificates of deposit: One of the most accessible fixed-income investments you can purchase is a certificate of deposit, which yields low returns but offers very low risk.
- Preferred stock: Instead of issuing bonds, some corporations choose to raise funding by issuing special notes that can be converted into common stock after a specified period.
Why Fixed Income Investments Are a Smart Choice
Fixed income investments are a great choices for current retirees or individuals who are getting close to retirement. The main benefits of fixed-income investments are:
- Consistent fixed income lets you plan for the future while avoiding taking funds from your capital base during times when money is low.
- Fixed-income investments are especially beneficial when they are exempt from taxation since they protect you from the uncertainty associated with tax increases and tax risk.
- Many fixed-income options, such as government bonds and certificates of deposit, offer the lowest risk possible.
- Adding fixed-income investments to your portfolio also gives you an extra degree of diversification that protects your capital during market crashes.
How to Find the Best Fixed Income Funds
Incorporating fixed-income investments into your portfolio is advantageous for almost anyone who has attained retirement or who is seeking to become retired. The key to success when choosing fixed-income investments is to conduct adequate research before moving forward. Failing to do your due diligence can result in significant losses, but investors who are informed can enjoy higher returns with lower risks. Finding a reliable financial adviser is often the best first step when seeking to add fixed-income investments to your portfolio. Making the right investment decisions will give you secure income in retirement while helping to preserve your capital.
Like anything, it’s always a good idea to be aware of the latest research. We recommend comparing at least 3 or 4 options before making a final decision. Doing a search online is typically the quickest, most thorough way to discover all the pros and cons you need to keep in mind.