The government only represents approximately 30 percent of our retirement income allotment. The companies that we work for and their retirement pension plan is only going to amount to another 30 percent or so, and most people do not even have these types of retirement plans. In other words, it is absolutely up to us to figure out how to invest wisely both on a short term and long term basis in order to make up for the shortfall in order to live comfortably following retirement without having to give up some basic freedoms during retirement age. Here are some of the fixed term investment types that are available to most consumers, with most lasting between 1 and 5 years in length.
1 - Term Deposit -
- The rate of return on term deposits tends to be higher than with most saving accounts. Some institutions may even allow for the funds to be withdrawn before the point of maturity if you are willing to sacrifice some of the accrued interest.
- The interest rate is guaranteed, and tends to be significantly higher than what is offered by savings accounts.
- Term deposits usually have a term of a year or less.
- Minimum deposits are most likely required.
- Term deposits are guaranteed by the Deposit Insurance Corporation (DIC) for certain amounts, but this is different from one country to the next.
2 - Guaranteed Investment Certificate -
- Guaranteed Investment Certificates have terms that range from 1 to 5 years.
- The Interest rate for GICs is guaranteed.
- The money in these certificates is usually locked in until the point of maturity.
- Some financial institutions may offer a higher rate if a minimum deposit amount is made.
3 - Treasury Bill -
- This is a short term promissory note that is issued by the federal government and called a T-bill or treasury bill.
- The usual denominations used for T-bills is $1,000, $5,000, $25,000, $100,000 and $1,000,000, and terms last as long as 365 days.
- Treasury bills are always sold at discounted rates.
- Investors can sell these treasury bills before maturity at a price that will be determined by the current interest rates.
- Investors can also buy older issues of these bills from investment dealers, who now make treasury bills available to small investors at $1,000 with $1,000 increments.
4 - Mortgage Backed Security -
- These mortgage backed securities are large pools of residential mortgages that institutions sell when offering mortgage options for home buyers.
- Each pool of mortgage has a unique maturity date an interest rate.
- There are two different types of mortgage backed securities, those which are pre-payable and those which are non pre-payable. Those which are pre-payable mean the mortgages permit home buyers to pre pay in order to pay their mortgages off more quickly.
- Every month, an investor for mortgage backed securities receives an income proportion of the principal as well as the interest for the mortgage.
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Originally posted 2009-03-16 05:36:42. Republished by Blog Post Promoter
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