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If you're near, at, or over the age of 70, making investment decisions can be difficult. That's mainly because older adults have completely different priorities about what they want from an investment. Fortunately, there are several ways to go if you're well past official retirement age and looking for a wise place to park $100,000. Step one is assessing personal goals for a sum that size.
After making a list of the results you want from the investment, create a shortlist of what's available. Of course, the usual selections include things like stocks, precious metals, annuities, and multiple low-interest, low-risk choices. Consider the following options before committing any funds to a particular account or locking them into a contract with a bank, insurance company, or another type of financial instrument.
How a 70-Year-Old Can Invest $100,000
First Step: Assess Your Goals
What can $100,000 deliver in terms of interest, growth, security, and other benefits? Well, if you're 70 or older, chances are that long-term growth is not in the cards for obvious reasons of timing. But, plenty of investors who want to squeeze the most out of a sizeable sum and who have a short time horizon consider taking a few more risks than the average middle-aged working person.
What are the possibilities other than long-term returns? While there's no definitive list, the top choices certainly include instruments and assets with a high chance of major growth or reasonable and consistent returns. Precious metals, dividend stocks from blue-chip corporations, annuities, and 60/40 (stock and bond) portfolios.
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#1. Blue-Chip and "Dividend Aristocrat" Stocks
The blue-chip category of equity stocks includes reliable corporations that have built a solid reputation in their industries. Many blue-chip shares also pay generous dividends, which means investors get not only a shot at significant appreciation but also a dose of regular income. The category called dividend aristocrats includes shares of companies that have paid continuous dividends for a quarter-century or longer.
Lots of retired people gravitate toward these kinds of equities, but as famous as the blue chips are, they come with their own set of negatives and don't always make ideal financial instruments for the over-70 crowd, primarily due to their sluggish rate of appreciation.
Pros & Cons of Blue-Chip and "Dividend Aristocrat" Stocks
Even the most elite category of equities comes with both good and bad features. On the positive side, blue-chips and dividend aristocrats offer:
What about the downside? The drawbacks of these otherwise attractive shares include:
The Verdict For Older Investors
Aristocrats and "blues" are safe and relatively reliable but lack reasonable rates of return for retired people who are looking for the possibility of healthier results.
#2. Precious Metals (PMs)
What good is an "insured" savings account, bond, treasury bill, or another fund when annual returns are in the neighborhood of 1%? Likewise, why should people invest their hard-earned money in instruments like annuities that come with exceptionally high fees and less-than-attractive returns? Precious metals like gold, silver, platinum, and palladium occupy a unique place in the investing landscape.
PMs have been around for centuries and are the only investments that don't have the chance of bottoming out or suffering bankruptcy. People have relied on the stability and chance of outsize returns on these metals and included them in portfolios for as long as anyone can remember. If the current decade's political, military, and economic strife continues, holders of PMs could be in a position to reap major returns without waiting very long.
While the four metals that make up the precious metal group are perhaps the strongest candidates for older investors, the category has its pluses and minuses. By far, the pros outweigh the cons amid the world's current economic and political climate.
Pros & Cons of Precious Metals (PMs)
The reasons to consider gold, silver, platinum, and palladium for a large, single-shot investment include the following:
The disadvantages of investing in PMs are
On balance, seniors who want the best bang for their buck rely on precious metals for a mixture of unique and more common reasons. The fact that the growth potential is unusually large and the potential time horizon for major returns is short are the two most compelling reasons. In fact, one of the components of the recent massive popularity of gold-backed IRAs is that the entire PM asset class offers unique benefits that stocks, annuities, and 60/40s don't.
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#3. Annuities Backed by Insurance Companies
Annuities are products sold by insurance companies. For the most part, they are only as safe as the financial health of the carrier who offers them for sale. While the instruments can be a good way to receive a fixed or variable return on a large deposit, there are rather large fees that come with annuity contracts. Plus, many agreements lock the capital into an untouchable account for a number of years. Regardless of the fact that these instruments feature many more disadvantages than advantages, some older investors like the idea of receiving a fixed amount of money each month, regardless of the high fees. Here's a quick look at the pros and cons of annuities.
Pros & Cons of Annuities Backed by Insurance Companies
#4. "60/40" Portfolios of Stocks & Bonds
Called "sixty-forties" by industry experts, these assets are mixed portfolios of equities and government bonds in the ratio indicated: 60% equities and 40% bonds. Investors can choose any stocks and bonds, but the most common arrangement is to use S&P 500 index funds for the stock portion and 10-year US Treasuries for the bond component.
In the past, these stable portfolios have performed reliably well over the long haul but suffer from inflation erosion, which brings their overall annual return to around the 5% level in average years. However, it's highly likely that 60/40s will lag in the coming years due to the effects of lower dividend yields, lackluster GDP growth, rampant inflation, and slower corporate growth rates.
Still, a review of the pros and cons is instructive:
Pros & Cons of "60/40" Portfolios of Stocks & Bonds
Bottom Line: Weighing All the Factors
It can be a challenge to find the ideal place to park a large sum of money, which is why older people who receive insurance proceeds, inheritance payouts, or have access to IRA accounts need to do some research. In short, the best option is probably the category that comes with the lowest amount of downside risk combined with the greatest room for appreciation.
That is why precious metals are the standout choice for anyone over the age of 70 who is seeking a smart, safe way to invest $100,000. The unique economic situation of the 2020s, in which so many political and other factors have created a highly volatile, unpredictable near-term future, adds a cogent line of reasoning to the argument for precious metals after weighing all the pertinent factors.