10 Investment Mistakes To Avoid In Retirement
Retirement! That golden era when you finally get to spend your days perfecting your golf swing, spoiling the grandkids rotten, or traveling to those places you’ve always dreamed of but never had the time to visit. But before you start planning that round-the-world cruise, let’s talk about making the right investment decisions. It’s not as easy as you might think, and we’ve got ten mistakes that you absolutely need to avoid.
1. Playing the Market Like It’s Vegas
Sure, it’s tempting to throw your hard-earned retirement funds into the latest hot stock tip from your golf buddy. However, you’ve got to remember that Wall Street isn’t the Bellagio. Unlike Vegas, what happens in the stock market doesn’t stay there and can seriously affect your retirement lifestyle. Don’t make risky decisions!
2. The Mattress Money Mistake
Stashing your cash under the mattress or in a low-interest savings account might seem safe. However, inflation means the value of your money will keep shrinking. Try going for investments that offer the potential for growth or income that outpaces inflation so your purchasing power will never fail.
3. The Set-It-and-Forget-It Fallacy
If you think setting up your retirement portfolio is a one-time affair, think again. Investments need you to check them regularly and make any necessary adjustments. Markets change, and so will your financial goals and needs. Ignoring your investment mix could seriously affect your financial security.
4. Ignoring the Tax Man
Taxes don’t retire when you do, and making withdrawals from certain types of accounts can be taxable. If you don’t plan for this, you might end up getting a pretty hefty tax bill! You need to understand how your investments will be taxed to avoid giving Uncle Sam more than his fair share.
5. Falling for the Illusion of Safety
A lot of people think that bonds are the safer investment choice for retirees. While it’s true they’re generally less unpredictable than stocks, they’re not without risk – especially in today’s low-interest-rate environment. If your investment portfolio is overly concentrated in bonds, it may not grow enough to support your retirement dreams.
6. Chasing Yesterday’s Winners
What might have worked last year may not work this time around. Broaden your horizons and choose investments based on your current financial situation and future goals. Speaking to an investment advisor can help you work out what decisions would be best for this current year and beyond.
7. Overlooking Fees and Expenses
Don’t ignore the costs that can come with your investments – they can be pretty high! Fees can take a considerable bite out of your returns as time goes on, so you must check over your expense ratios and trading costs. This way, your investments will remain as profitable as possible.
8. Succumbing to Scare Tactics
There are plenty of financial pundits out there who will forecast pretty terrible economic futures. However, if you sell off your investments in a panic because of these forecasts, this can be pretty harmful. It’s important to stick to your investment plan, bearing in mind that, historically, markets tend to increase in value over extended periods.
9. Being Too Homebound With Investments
Yes, it can be nice to stick to what you know and invest in familiar territories, like companies based in the United States. However, this can restrict the breadth of your investment portfolio. Opening up to global markets can introduce growth opportunities that you may not get in domestic markets, so embrace the potential of international investments.
10. Letting Emotions Drive
One of the worst things you can do is let fear and greed destroy your investment strategy. Don’t make any hasty decisions in reaction to recent news or changes in the market. Get a reliable plan and stick to it, making any adjustments based on changes in your financial circumstances rather than emotional responses.
Avoiding Mistakes
Your retirement should be a time of joy and financial peace. Avoiding these common investment errors can help you manage your retirement with financial elegance and steadiness. The biggest thing to remember about managing retirement funds is having a long-term strategy and consistent oversight.
Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.