Investing In Retirement and 3 Big Mistakes to Avoid (Video and Slides)

(My ROUGH notes from the presentation)

Investing In Retirement

Investment Policy

A coherent set of guidelines for managing financial assets that are in line with your goals and the realities of the investment markets. 

This policy will provide overarching guidance on the implementation of: 

-Asset allocation

-Portfolio management, and

-Investment strategy

It should cover: 

-Risk tolerance

-Have a realistic rate of return based on your risk tolerance. 

Your Investment Policy

-Serves as the basis for developing, administering, and reviewing an ongoing program of investments.

-Think of your investment policy like a ‘compass’ that keeps you pointed toward your higher goals, and as a tool to drown out the noise and fear tactics of the financial media. 

-2017 was one of the calmest years for the stock market of the last 5 decades. 

-But, a normal year has about 50 moves of 1% or more in the market, or about 1 per week. 

There are times when investors lose their sense of direction.

-The Dow Jones has dropped 300 points!  Maybe I shouldn’t be investing in stocks? 

-The stock market has risen 15% in the last year, why do I have half my portfolio in bonds? Shouldn’t I shift more to stocks now? 

This is exactly why you should, and we do with clients establish a written Investment Policy Statement (IPS) so that when turbulent times come, we can go back to your IPS and remember why we are investing the way we are. 

The purpose of the investment policy is twofold: 

  1. To provide a foundation of goals, time horizons, and constraints on which the portfolio is constructed; and provide a basis for review, performance evaluation, and adaptation to changing conditions.

The only thing that is constant is change -Heraclitus

When you have a proper investment policy in place, and changes come, you have your compass to refer to before you make any irrational decisions. 

A sound investment policy is realistic, has a long-term perspective, and is clearly defined. 

3 Big Mistakes Investors Make in Retirement

They let FEAR be the dominant emotion when it comes to making decisions on what to do with their nest egg.

-They are worried about running out of money so instead of working with a qualified investment advisor that can deeply help them understand your risk tolerance, timeline and retirement funding needs, they put WAY too much money in an insurance product like an annuity. 

Annuities have the benefits of downside protection, but very limited upside. They will claim 2-4% returns but you have to remember there are fees that are subtracted from that many times over 1% that aren't explained very clearly in the annuity contract. 

You also lose control of the money. Say you put in 50% of everything you have, now you no longer have that money if there was an emergency or you needed medical care. All you get is your monthly payment. And most of the time those payments don’t increase with inflation. Over time those payments don’t keep up with inflation and you get less and less with your money each year. 

They OVERPAY for investment expenses. 

Large-Cap Stock Funds: 1.25%

Mid-Cap Stock Funds: 1.35%

Small-Cap Stock Funds: 1.40%

Foreign Stock Funds: 1.50%

Bond Funds: 0.90%

This would give you an average fee of 1.28% 

This may not include additional fees like 12b-1 fees that are hidden deep in the paperwork that can be .25%-.75% PLUS any front/rear loads that the broker takes as a commission. If they also charge you for investment management, the average fee 

This is typically ONLY for investment management. Or very basic financial planning. 

The average investment portfolio fees at Keep It Simple Financial Planning? 

Portfolio fee: .10-.30%

Management fee: .65-.95%

Technology fee: .20%

They try to do it all on their own. 

Most people think that financial planners only offer advice on investments or insurance. 

-while this is true for the majority of people calling themselves ‘financial advisors’ 

-there SO much more to get your retirement plan RIGHT


-Social Security timing (easily a 6-figure decision)

-Medicare plan selection 

-Estate and Tax planning

-Pension decisions 

-Business planning

-Creating additional income streams

-Tax reducing distribution strategies for your retirement accounts

-Roth conversions for tax-free investments later

-Business/encore career planning