The majority of middle class workers save for retirement by investing in publicly traded stocks. This is how it has been done for decades. With 401(k) plans and other company-matching deals, this makes putting all you retirement in the stock market really attractive. But, is the majority of people right about this? Or are people just clueless as to what investments to put their hard earned money into.
2008 really woke people up and made them think twice about what they are investing in. After saving 10% of your salary, your retirement account starts getting pretty large over 20 years or so. In 2008, people lost 50% of their total portfolios. Sadly, if you were nearing retirement in 2008, your retirement just got pushed back 5 years or more when the market dropped.
So, should you have all of your retirement in stocks?
Some people have started to search for other investments to place their money. This can include rental property, commercial real estate, and even small businesses.
I know many people that have a few small residential rental properties they are going to depend on in retirement. Most, if not all, of their properties will be paid off before their retirement age, which means they will only be responsible for the taxes, insurance, and repairs and maintenance on the properties. If they stay rented with good, paying tenants, these rentals can produce steady streams of income for many years.
Another alternative to investing your retirement in stocks is to buy a small business, maybe even a food franchise. This can be a little riskier, but usually more profitable. There are many fast food franchises out there that do not require too much capital up front to purchase. If you know a little about the industry, you can own a very successful fast food restaurant. Buying small businesses is all about hiring the right people to manage the operation day to day. If you are still working, it can be very tough. Especially in the restaurant industry, you only get one opportunity to mess up before you start losing money.
Of course, there are other ways to invest for retirement without having to buy stocks. I own a small percentage of precious metals, land, and even livestock. This help to diversify my retirement in case 2008 happens again. You will always have risk in your retirement plan, but you can always lower that risk by diversifying what you are investing in. Of course, the majority of my retirement is in stocks, but I am also many years from retirement.
Diversification in detail at http://www.investopedia.com/terms/d/diversification.asp