We all make mistakes from time to time when it comes to our finances regardless of what age we are. For those who are younger and still working, they have time to recover from their mistakes and prepare for retirement. Retirees on the other hand have limited room for mistakes. They do not have enough time to recover from any mistakes that they may be involved with. We have summarized a number of areas that retirees will make a mistake managing their money. Especially when approaching and during retirement. As we mentioned if you are just starting to think about retirement, these items are worth reading about as well. They might save you a great deal of money over your life time.
The basic guideline for anyone is to invest in blue-chip companies, that are managed well, pay dividends on a regular basis and have a history of increasing their dividends over time. Diversity is also extremely important. Never place all of your money in the same investment no matter how good it sounds. In fact no more than 10% of your savings should be in one investment. If you are above 10%, it may be time to re-balance.
Financial mistakes retirees make
These are some of the more significant mistakes people make.
- Timing the market,
- Trading too often
- Reacting to the market
- Making emotional decisions
- Working with the wrong adviser
Timing the market – is next to impossible and many people lose money every year trying to time the market. Long term charts of the markets show that the Dow, the TSX, etc have all been on a steady up word trend. Sure there have been some dips, however, if you are in the blue-chip companies, those that are here to stay, then you will survive those dips and also participate in the market gains as well along with sustaining dividends over the long term.
Trading too often – every time you trade, there are fees to your adviser which can be very expensive. These fees can eat into any gains or income you may receive. Trading often can even cause your portfolio to head into negative territory. Buying good quality stocks as we mentioned and holding them to collect increasing dividends will not only maximize your income, it will also minimize your expenses as well.
Reacting to the market – the market is volatile at the best of times. Swings or 1 to 5% are the norm and swings of more than that can send shivers through the investing public. The thing to remember is that the market has shown that it will always recover and if you’re invested in dividend-paying stocks, you will continue to receive stocks even though the value of the stocks is down for a temporary period.
Making emotional decisions
Always go by the numbers, never by emotions when making decisions. You might get lucky, but then if you are reacting to a volatile session in the market or to a speculative tip, the majority of investors are going to lose.
Working with the wrong adviser – work with one that you trust, that gives good advice and one who has a good track record. If it sounds too good to be true then it probably is and if he or she is trying to push you into investing or doing a lot of trades, ask for a second opinion. In fact, if you have sufficient money, it might not be a bad idea to diversify and have two advisers to compare their recommendations.
This is your money and it needs to last you in your retirement. don’t make mistakes and decrease your chances of having the retirement you always dreamed of.