Mistakes that Could Cost You a Million

An article on the Motley Fool website (one of our Platinum Web Sites, www.fool.com) from February 27th just caught my eye today. The article is entitled, "Mistakes That Could Cost You a Million," which in turn refers to a recent Consumer Reports article that lists several potentially expensive blunders people can make. And two of the mistakes they warn about directly apply to boomers facing retirement.

The first is:

Investing too conservatively during retirement - They looked at a range of 20- and 35-year periods between 1940 and 2006, and found that "an all-stock portfolio provided [a hypothetical investor with $500,000 to invest at age 65] $750,000 more than an all-bond one." You might think that it's risky to invest in stocks during your retirement, but remember that even at age 70, you may well have another 20 years to live and invest, and that the portion of your money that you won't touch for at least five to 10 years may flourish in stocks. You needn't put it all in stocks, but consider tapping stocks as much as your comfort level permits.
The second blunder you can make is "retiring before you need to (which can cost you several hundred thousand dollars)." That's all the Motley Fool writer has to say on the subject, but as you know, yours truly has written several times about this, and I have thrown many, many numbers at you, and I know that there are many of you out there on whom those number crunching arguments are lost. (And when I forget this, the "platinum wife" Melanie is only too happy to remind me :-) So here's how I summed it up NON-numerically in a comment to a post on www.marketwatch.com:

"In my opinion, far too many people take it early, either because they just want to "take the money and run" or don't really understand how long they will probably live. But the greatest risk they face financially, the risk of outliving their money, is greatly increased when they retire early. And they truth is, there is far more they can do about it when they are relatively healthy, in their sixties, than when they are in their seventies and eighties."
So it's good to see that the big financial websites agree :-) And tomorrow, I'll take a look at the first blunder, that of investing "too conservatively." Stay tuned :-) Bob


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