Retirement Investing: Five Mistakes to Avoid
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What headlines and market news set the stage for retirement advice?
Here's your money briefing. I'm J.R. Whalen at The Wall Street Journal in New York. Slow and steady wins the race, right? Well, not when it comes to investing and planning for retirement. We have the five biggest mistakes investors make coming up. First, these money and market stories you should know. The IPO of the ride-hailing company Lyft and the upcoming Uber IPO are big news on Wall Street but could be bad news for riders in the form of higher fares. Journal reporter Elliot Brown says that Uber and Lyft have battled each other for years in a price war that has significantly undercut taxicab fares. But those days of cutthroat U.S. prices might be numbered as the companies could face pressure to generate profits.
Why is investing too conservatively a major retirement mistake?
But low fares could continue if investors can put up with losses in favor of ridership growth. And both companies have enough cash in the trunk to keep up a fare war. Lyft raised $2.3 billion in its IPO last month, while Uber plans to raise $10 billion in its IPO expected in May. And sales of existing homes fell 4.9% in March in the U.S. from the previous month.
How should retirees determine the right stock exposure for longevity risk?
That's the word from the National Association of Realtors. Sales were down 5.4% from a year ago, marking 13 straight months of annual declines. Now, home sales in February had experienced their second-strongest monthly gain ever, offering the possibility that the market was finally rebounding. But March's numbers were a setback as the housing market headed into the crucial spring selling season. Freddie Mac says the average rate for a 30-year mortgage, which approached 5% in the fall, fell to 4.17% last week.
Investing for retirement is one of the most important things that we can do. And investing conservatively might seem like the smart thing to do to be sure there's enough money in your post-career years. But it turns out that's one of the biggest mistakes people make.
How can overspending early in retirement jeopardize your nest egg?
Wall Street Journal contributor Cheryl Winokur-Monk writes about some of the biggest missteps people make when preparing for retirement, and she's on the line with us. So Cheryl, it seems counterintuitive that investing conservatively to avoid risk would be frowned upon, but that can actually come back to negatively impact people.
Yes, it can. The issue is that life expectancies are so much longer today. The average American man will live to age 76 and the average American woman to age 81.
What retirement expenses do people commonly underestimate (healthcare and family support)?
And the issue is if you start investing too conservatively too soon, then the chances of you running out of money later on increase.
So how can people go about bringing more risk into their portfolio? I guess a good lesson to think about is that when there's more risk, there could be more reward.
That's true. They have to be careful, of course. But one thing that many retirees want to do is get rid of any types of stocks in their portfolio.
How should retirees manage withdrawals and taxes to avoid surprises?
And that's not necessarily the right thing to do. They really have to look at their age, their health, their family history, and take into account potential bear market scenarios and the chance that returns may be lower and take all these factors into account and another mistake you've seen people make is they spend too much early in retirement yes they get very carried away in some cases they all of a sudden they have this freedom and they want to go on trips around the world and buy special items that they maybe they couldn't do before things they didn't have time for before And then all of a sudden, they realize that once they've spent these huge sums of money that they've really broken the bank and they risk running out of money way earlier than anticipated.
And then you've seen that people tend to not plan out what their expenses will be in retirement.
That's correct. They know what their expenses are before they retire in many cases. In some cases, they don't.
What investment pitfalls (chasing yield and high fees) should retirees avoid?
But in many cases, they do. But they just don't kind of look ahead. One area where they really fall short is health care. Fidelity just came out with a study that said that the average couple will need $285,000 for medical expenses in retirement, and that's excluding long-term care.
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Chapters
7 chapters
1
What headlines and market news set the stage for retirement advice?
0:05–0:46
2
Why is investing too conservatively a major retirement mistake?
0:46–1:12
3
How should retirees determine the right stock exposure for longevity risk?
1:12–2:06
4
How can overspending early in retirement jeopardize your nest egg?
2:06–2:34
5
What retirement expenses do people commonly underestimate (healthcare and family support)?
2:34–3:02
6
How should retirees manage withdrawals and taxes to avoid surprises?
3:02–3:57
7
What investment pitfalls (chasing yield and high fees) should retirees avoid?
3:57–6:52
Speakers
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