Useful Hobbies For Senior Citizens - Quicken Loans Zing BlogFor years you’ve been the retirement-minded investor. When others were only thinking about the present and living from paycheck to paycheck, you were taking control of your finances, investing in IRAs or 401(k)s and paving the way for a comfortable retirement. And now, after all that time, you’ve climbed to the top of the peak, and it’s time to start withdrawing from your shrewd investments.

But how should this money be used? You want to live comfortably, sure, but there are several other options and venues that can help put your resources to good use. Whether it be investing in a portfolio, investing in the future of your children and grandchildren, or even investing in that trip to Versailles and Madrid, it’s important to know that your financially savvy days don’t have to end in your golden years. After all, they’re called golden for a reason.

Let the Tightwads Breathe

Before continuing, it’s important to take a step back and consider the purpose of investing after retirement. Several frugal retirees have spent the majority of their lives saving and cutting the fat in order to prepare for this moment. And these behaviors, while commendable, could become harmful in the latter stages of life, causing people to hold their money in such a white-knuckled grip that they never take the opportunity to spend any of it.

According to Jeffrey R. Brown, Ph.D., a finance professor at the University of Illinois at Urbana-Champaign, “There are both rational and irrational reasons to spend money.” Finding the balance is essential when considering whether or not to invest. In an article on FoxBusiness.com, Brown explains that a rational reason, for instance, might be putting money aside for time in a nursing home. An irrational reason, on the other hand, could be investing as a means to hoard your resources, “simply because you can’t bear to see your net worth decline.”

In other words, you should reflect on your desire to invest during retirement. Investments can be a great choice for you and your family, but not if they’re limiting your current quality of life.

Financial Fears and Realities

Of all the obstacles you might expect to face during retirement, financial instability shouldn’t be one of them. Because of this, pursuing high-risk investments is ill-advised. But more surprisingly so, it’s not recommended that you invest your money in low-risk accounts like CDs or money markets either. These accounts accrue low amounts of interest, making them potentially useless when considering the long stride of inflation. These extremely conservative investments will not be able to keep up with the pace, which is likely why Frank Armstrong III, author of “The Retirement Challenge: Will You Sink or Swim?” calls inflation “your biggest enemy in retirement.”

Investing for the Middle Road

While risk is an inevitable part of investing, creating a diversified investment portfolio provides the best opportunity for overcoming inflation. Timothy McCarthy, a blogger for The Smarter Investor, explains that “this mixture of assets should include all levels of equities, large-cap, small-cap, various industries, different styles, both active and passive funds, plus a variety of corporate and government bonds, mixing short and long-term duration.” This variation provides protection for your assets, taking all of your eggs out of a single basket, and spreading them among several lower-risk baskets. U.S. News provides a great starting point for planning your high-variety portfolio, or you can talk to your personal finance advisor.

McCarthy also suggests that new retirees consider investing in countries overseas, going as far as to say that “it is no longer wise to have your entire core portion invested in only one country.” Investing overseas will diversify your portfolio and decrease instability, and there’s also a great likelihood that these investments will increase the overall return. However, this advice must be taken with a grain of salt. Stay clear of countries with young, potentially unstable economies. These “frontier countries” may seem appealing at any given moment, but there’s no guarantee that these upward trends will continue. A better alternative would be to invest in the economies of countries that are doing well year after year, such as Chile, Australia, Canada and Singapore. Think Advisor gives a useful list of the top 20 investment-friendly countries.

Investing in the Next Generation

In recent years, retirees have started focusing on the financial trials of the upcoming generation, specifically choosing to invest in the future of their grandchildren. According to Fidelity’s 2014 Grandparents and College Savings Study, “72% of grandparents think it’s important to help pay for their grandchildren’s college education.”

There are several ways to set money aside for your grandchildren, but a 529 college savings plan, which allows grandparents to give up to $14,000 per year, per grandparent, is often the best option. The main reason a 529 outweighs other savings plans is because it provides tax-exempt options. For example, withdrawals from a 529, which must be used for tuition, books, fees and supplies, are considered federal income tax free. Using a 529 college savings plan will make sure that your dollars go further, and that is especially important when they’re going toward your grandchildren’s education.

Once again, this advice comes with a warning. Depending on your situation, a 529 may or may not be right for you. Once the money is distributed for educational purposes, it counts as student income, which will have a large impact on your grandchild’s financial aid. Another drawback is that this money must be used before your Medicaid payments can begin, meaning that this plan should not be considered if you’re planning on using federal medical assistance during your retirement. For a comprehensive explanation of the pros and cons of a 529, as well as other popular college saving plans, check out this personal finance piece from Fidelity.

Investing in Yourself

Even while you’re preparing for your future with investments in industries, government bonds, and savings plans for the grandchildren, don’t forget to invest in your day-to-day life. Retirement should be a time to enjoy yourself. Spend time with your family and loved ones, take up a new hobby, learn a second language, or even take that vacation you’ve always dreamed of. Don’t be afraid to treat yourself. After all, you’ve earned it.

And never forget that you can spend money while maintaining your financial shrewdness. Check out discounted or free events offered for seniors in your community, such as dancing or cooking classes. Or, if you’re in the mood for travel, use your financial know-how to find countries where you’ll get the most bang for your American buck. Whatever path you decide, capitalize on your resources. Make these the best years of your life.

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