Risk Management For Seniors

Risk Management for Senior Investors

What are some safe investments that carry minimal risk for seniors?

Updated on May 29 2020


As you approach retirement (or if you are currently retired), investment risk management is especially important. Generally, your fixed income will be smaller than if you were still working, so investing can be a great way to make up for the loss of money coming in. Smart investment decisions must be made so you don’t lose the money you worked your entire life for. What are some safe investments that carry minimal risk for seniors?

Diversify your portfolio

Diversification is one of the best ways to plan for risk management. There are risks when you own stocks in just one company or industry. If there is bad management or that industry suffers from an economic downturn, you chance losing your investments.

Diversifying your stock portfolio is called asset allocation and a financial advisor will be able to help you decide where you should be investing. There are financial advisors who specialize in retirement planning, so they’ll be experts in minimizing your risk while maximizing your investments. While diversification is generally considered one of the smartest investment strategies, be warned that there is no guarantee in stocks and you may not always earn money—especially during a recession or economic downturn.

Optimize your risk management by employing a calculated risk-taking strategy

Working with a financial advisor who specializes in retirement planning will be your best bet for reaping the benefits of a calculated risk-taking strategy. This is generally not recommended for many seniors to try on their own—this is worth taking the time to seek out a financial planner who is thoroughly familiar with this type of investment strategy. The Balance tells us:

“Employing a calculated risk-taking strategy takes knowledge, research, and common sense. It is not an autopilot approach. You have to understand how to view markets from a logical and rational approach, not an emotional one. You also need to understand certain ratios and indicators you can use to help you assess the market.”

Other investment strategies that may be safe for senior investors

Certificates of deposit - Certificates of deposit (CDs) are FDIC-insured and are considered to be risk-free. With a CD, you invest money and your bank will return the money you invest with interest. It is likely that the interest gained will be higher than the interest rate on a normal savings account.

Dividend-paying stocks - Dividend-paying stocks offer less risk for less reward. These stocks are companies that pay out regular dividends. Typically, you’ll find these to be well-known companies with a solid track record.

Immediate annuities - An immediate annuity is when a company pays you a fixed amount of money per month. It’s an insurance product that “gives the buyer a guaranteed stream of income in exchange for a lump sum of cash.” Think of an immediate annuity like a pension plan.

A good investment strategy can make your retirement that much better, but investing is inherently risky and you must consider investment risk management. We highly stress a financial advisor who specializes in retirement planning if you are considering investing throughout retirement so that you don’t make mistakes that may hurt you financially.

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