Essential Investment Mistakes Most Boomers Make That Can Ruin Retirement

 In Personal Finance, Retirement


When asked, most baby boomers will tell you that they understand the need to have an investment strategy, when it comes to their retirement. But when looking directly at the facts, it becomes clear that many baby boomers are on their way to coming up short, when it comes to their retirement goals.

This is why it has become so important to investigate and understand the facts surrounding retirement, as they exist today.

It stands to reason that saving diligently is a critical factor to prepare for retirement. However, this needs to be combined with a proper investment strategy. And, therein, lays the biggest investment mistake that many individuals will make.

That mistake is not taking the time to look at the proper investment options and following a sound investment strategy. Let’s take a look at how you can avoid the possibility of not having the savings needed to support you for the remainder of your life, upon retirement.
saving for retirement

Listening to the “unqualified”

There are hoards of self-titled “investment experts”, who can be found throughout the Internet. These people claim that they know exactly which way the market will be headed and the sure-fire way to best invest your retirement funds.

The first thing that you’ll notice is that many of these individuals have conflicting theories and can only offer confusing advice, should you listen to more than one of them.

In any case, you may recall all of the so-called “experts” who predicted the impending downfall of bonds (since 2011). Isn’t it funny how the exact opposite has occurred, with consistent gains in the broad taxable bond market?

Of course, it’s obvious that the investment markets don’t show gains in a straight line. Needless to say, investment marketswill lose ground every so often. But the danger lies in making unnecessary fear-based reaction moves that eventually

But the danger lies in making unnecessary fear-based reaction moves that eventually cost you, instead of helping your savings and investment portfolio.

Choosing an Inappropriate Investment Strategy for Retirement

The investment world is littered with all kinds of strategies that promise to give the best returns. They can have titles that make them look like they’re recommended by wealthy businessmen or they can be promoted by financial advisors that carry impressive titles that make them seem all-knowing.

However, even if a plan has, in the past, provided good performance or is endorsed by a successful investor, it doesn’t mean that the plan is right for you and your retirement needs. You have your own goals and your own comfort zone, when it comes to your investments and these should be taken into consideration.

For example, it may prove to be highly beneficial to determine the stages in which your investing should become more aggressive.

In addition, you will want to begin to invest for retirement on an investment mix that consists of bonds and stocks that is set up to generate the amount of returns that are consistent with your goals – but in a way that is also within your comfort zone, when it comes to any risks involved.

One way to determine this is to take advantage of one of the free online tools that can indicate the potential results of a portfolio, based on performances over a number of decades.

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Returns are not the only things to consider

It’s interesting to note that there is something else, which can cause an investment portfolio to under-perform, other than picking investments with low returns.

You may be surprised to know that investment fees need to be considered, as well.

You can avoid problems in this area by investing in broadly diversified index funds (ETFs). You can find a number of these with under 0.20% annual expenses per year.

However, if you decide on an investment that includes actively managed funds, look for those with a lower cost, since these can carry 1% (or more) in annual expenses. You also need to consider any fees that you may be paying to a financial advisor.

Leaving well enough alone

It’s only natural that you may desire to improve upon a current success. But it’s also important to understand, that as times change, the big returns that may have existed in the past are no longer there.

This is why you’ll need to consider the new retirement investment strategies, proposed by investment advisors, with a grain of salt. You may be approached with a “better” investment plan that is being suggested for its potential returns increase or a better diversification strategy.

But you will want to avoid complicating your current portfolio with additional trendy investment strategies. You may find yourself not only adding little to no value in returns, but you may even inflate your costs!

After you have constructed and maintained a well-balanced retirement portfolio, the best thing that you can do is to just leave it alone. The only exceptions can be to periodically re-balance your portfolio.

You may, for example, decide to shift a bit towards your bonds percentage. This can serve to reduce your risk factor. But, if you feel tempted to do a lot more, then remember that “doing more” can easily result with providing you less.

So, when putting together your own retirement investment strategy, the most important thing is to keep in mind that you need to balance your current living situation, with the goals that you wish to achieve in later years.

Additionally, your approach to investing must also match your comfort zone when it comes to the type of investment risk that you’re willing to take. Other things to consider, can include making sure that your retirement nest egg also implements  a tax diversification strategy.

It’s your responsibility to ensure that your retirement years are ones in which you have the freedom to enjoy the lifestyle that you have imagined during your working years.

Avoiding the pitfalls, like the ones that have just been outlined, are critical when it comes to securing a comfortable future in tomorrow’s economic environment.
saving for retirement

Sergey Sanko
Sergey had started an IncomeClub after years of being an investment advisor for high affluent investors and managing fixed income securities. He is the lead investment advisor representative and holds a Series 65 license. Sergey earned his Executive MBA degree from Antwerp Management School.
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