Recently Kiplinger released a report listing some common retirement mistakes. After reading the report, I have to agree with much of what they say and recommend. The senior analysts at ITM Trading spend a substantial part of their days speaking to people just like you who are trying to safeguard and grow their wealth. In those conversations, the analysts hear all types of different ideas and investment products that clients have tried. Some work and some don’t. Retirement mistakes are common, and during my time as a senior analyst at ITM Trading, I saw and heard about all of these and more, firsthand. Place gold in your IRA , Learn about ITMTrading’s Precious Metals IRA
Retirement Mistakes To Avoid : Not Investing Enough In The Stock Market.
If you could still get six to eight percent by putting savings into a CD, I would be apt to recommend an insured account over stocks. However, since banking products are trending towards savings accounts that actually transfer your wealth to the bank through the magic of negative interest rates, banking products are becoming less relevant in the long-term wealth building arena.
If you are going to play the stock market, however, realize that it is gambling. You can win a certain amount (Stock gains are limited) or you can lose it all if a stock goes under. If you are going to diversify into the stock market, I believe you should know just as much or more about your portfolio and the companies that you buy stock in than you do about your favorite sports teams and players. If more Americans were as passionate about their investing as they were about the NFL, I think many American retirement accounts would be much better off.
Kiplinger suggests holding at least 20% of your wealth in stocks. I would recommend that 20% be the top limit to hold in stocks right now. The stock markets are over-valued right now and will correct downwards, and Americans cannot continue to support large corporate growth on diminishing incomes. These are both long-term problems that will affect stock prices.
Retirement Mistakes To Avoid : Investing Too Much In The Stock Market.
Kiplinger also says not to invest too much in the stock markets. However, a 60% stock allocation in the portfolio of a retired American or soon to retire American, like the report suggests, is much too high in my opinion. Let us take a minute to remind ourselves that companies like Kiplinger and Schwab exist to do business in the stock market world. Of course, they suggest owning a large amount of their financial products.
The truth is that most working class American did not really start investing in the American stock markets until sometime in the 1980’s when mutual funds and 401k’s became the new norm rather than pension plans and full retirement benefit packages. The first generation of Americans that will retire using the financial products developed in the 1980’s will not truly begin to retire in large numbers (if they can) until around 2025 or so. We really won’t know how well the retirement products worked until then.
Retirement Mistakes To Avoid : You Live Too Long.
I’m not sure if Kiplinger was trying ironic humor with this mistake, but living too long can have financial consequences, especially with some insurance products. For instance, I do recommend term life insurance, especially if you are married and / or have children. Term life insurance is inexpensive and is really just a financial responsibility.
The downside to term life insurance is that once you reach a certain age, term life insurance becomes very expensive to extremely expensive. For instance, carrying $500,000 to $1,000,000 of term life insurance in your 20’s, 30’s, 40’s and 50’s is relatively inexpensive, but it is a cost you incur every year. After paying term life insurance premiums for 20 or 30 years, you somehow expect to leave your spouse or children a decent sum.
However, if you live to be 80+, you may only be able to afford a $10,000 or $20,000 policy to leave your loved ones, because term life rates increase dramatically by age 70 or so if it is even available to you. I think what Kiplinger is trying to say is that you can outlive retirement products that are designed to keep the wealth of the retirement investment company intact while extracting wealth from the client.
Retirement Mistakes To Avoid : Not Owning Gold.
Kiplinger said absolutely nothing about owning gold because Kiplinger does not sell gold. In fact, no stock market-based retirement programs or banking based retirement advisor will sell you physical gold and silver for your retirement portfolio. They can’t. If you ask them, they will suggest a fund or stock, but they will never sell you an American Gold Eagle out of their briefcase. Their license won’t let them.
So, you have to put physical gold and physical silver coins and bars into your retirement portfolio yourself. Jim Rickards has recently said that gold is the investment of the century. If you look at the price of gold from 2000 ($272.65 / oz.) to present ($1280.30 / oz. as of 5/4/16) and compare the gains against the stock market gains and crashes of the last 16 years, there is no relevant comparison to be made. Gold has outperformed stocks so far this century.
As I said before, stocks are like gambling. You never know what is going to happen with the value of your stocks. Great companies crash overnight and potential gains evaporate. Conversely, gold has never crashed. Silver has never crashed. The numbers that people make up to assign a currency value to an ounce of silver or gold fluctuate, but an ounce of gold always has value. An ounce of silver always has value.
I like history, and I find American economic history fascinating. Did you know that of the original 30 stocks that comprised the original DOW30 when it first began trading, only 1 is still in business? The rest either failed or declined in value until they were kicked off the stock exchange and absorbed, etc.. 29 out of the 30 original DOW corporations are gone. Gold and silver are still here. Diversify into precious metals and add longevity and growth to your retirement portfolio. If you do choose to gamble in the stock markets, I wish you better than 1 in 30 odds.