How To Assess The Advantages Of Financial Investments In Retirement Planning


Financial investments are central to nearly all forms of retirement planning. You might wonder how to assess the advantages of particular investments for your purposes, though. A retirement planning advisor will usually recommend investments based on the following criteria.

Suitability for Your Objectives and Situation

The best investment strategy in the world is the one that fits your objectives and your current situation. If you're 50 years old and planning to retire at 55, an investment with a 10-year horizon isn't necessarily the perfect fit for your goals. Someone who bought Amazon stock in 1997 would've made a great return between then and now, but they also would've ridden out many ups and downs. That isn't to say such investments don't belong in a late-stage retirement planning portfolio, but they shouldn't be the centerpiece of the plan.

Your situation is also very important. A young person who wants to achieve significant growth with limited starting capital should pursue different financial investments than the person in the previous example. The 50-year-old might look more at bonds, annuities, index funds, real estate, and certificates of deposit. These are generally conservative investments for folks who are close to or past their retirement planning goals.

Risk Tolerance

Everyone tolerates risk differently. Smart retirement planning requires a serious assessment of what your risk tolerance is. If you're the kind of person who'd feel sick to the stomach if an investment cratered 50% in a matter of months, then you're going to invest more conservatively.

Conversely, some folks can ride out losses, keep investing, and see how things play out. If you're investing for the long haul while maintaining a strong appetite for risk, you better be ready for the roller coaster ride. More importantly, you need to be honest with yourself and your retirement planning advisor about your feelings toward risk and volatility.

Tax Benefits

Big returns can often mean major tax bills. This can temper some of the excitement of more aggressive strategies. A retirement plan should focus on investments that fit into tax-free or -deferred accounts. This doesn't exclude high-risk investments, but it may limit you to whatever you can fit into an account like a 401k.


Similarly, a good plan should avoid accumulating too many fees. Moving in and out of equity positions, for example, can incur fees. Likewise, many non-traditional investments like art and cryptocurrency have fees that kick in at the moment of sale. Know all of the fees before you move into any type of investment.

For more information on retirement planning, contact a professional near you.


15 February 2023

Learning More About Finances

After we bought a house, I started realizing that we were going to need to learn to save a little money. We had become pretty laid back about spending because we were so accustomed to making so much extra each month, but with a mortgage, we found ourselves running out of money on a regular basis. I decided to get real about our finances, which is why I set up a financial plan to stick with year round. You wouldn't believe how much of a difference that simple plan made. We went from scraping together money to head to the grocery store to sticking with a rock solid budget.