Entrust Learning Center > Recommended Reading > How to Outlive your Retirement Savings in Seven Easy Steps

How to Outlive your Retirement Savings in Seven Easy Steps

We at the Entrust Group have the privilege of working with clients that are well into their retirement years as well as those just starting to save. One common trait can be found

By: Glen Mather

IRA Insights

By: Glen Mather

We at the Entrust Group have the privilege of working with clients that are well into their retirement years as well as those just starting to save. One common trait can be found throughout  those choosing to build their retirement wealth through self-direction—the desire to take an active role in decision-making regarding their investments.

Unfortunately, most individuals, though they may be diligent in saving, are making investment choices that may cause the unthinkable to happen – running out of retirement funds prematurely.

Here are seven investment strategies that can derail the most conscientious
of investment plans:

Undue reliance on the advice of strangers

From channel flipping through the financial news networks to reading Barrons, Fortune and investment newsletters, many investors are intent on moving their investment chips from one bet to another. Others simply find the latest hot fund manager and turn their funds over to his or her stock picking expertise – hoping history will repeat.

Investing in something you know nothing about
While some investors follow the advice of Warren Buffet who says, “never invest in a business that you do not understand,” most do not. Indeed, sometimes if you understand the business, you still may not be sufficiently sophisticated to deconstruct a cash flow statement statement.

Most investors spend more time in researching the next automobile they plan on purchasing than their stock investments - despite the dire implications of this misplaced priority.

Follow the crowd
The Lemming approach to investing is borne from the natural instinct of not wanting to be left out (or just plain greed). The empty promises of those hot companies that were left behind after the dot-com bubble burst left many investors bruised and bloodied, yet surprisingly still seeking the next great thing.

Limit yourself to the stock market for your investments
Proper diversification is generally a sound investment strategy, namely as a defensive tool
for those not wanting complete exposure to a significant market downturn. Most advisors
suggest that this be accomplished within the stock and bond market through the purchase of various stocks, bonds, and mutual funds. Unfortunately, most investors are unaware of
other choices that can reduce the dependency on the stock market.

Erode your gains through payment of commissions
In my office building, there are at least two or three arbitration hearings scheduled each week; the defendant is generally a stock broker or representative of a trading house with the plaintiff being a retiree who has lost the majority or all of his or her retirement assets through alleged churning (excessive stock trading for the pur- poses of earning additional commissions).

Increase your investment risks to make up for past losses
Las Vegas was built on this philosophy, yet some investors are still intent on betting wildly instead of making informed decisions. Steady solid investments will always beat the occasional big returns that are almost always followed by disappointing losses.

Get taxed on each gain
For the individual that invests funds outside their retirement plans (post-tax) – each realized gain comes with a tax bill, reducing the amount that is available for reinvestment. Within a 20 year investment cycle, the gains through tax deferred investing can be as much as 37% more than  paying capital gain taxes along the way. (assumes semiannual gains taxed at 15% capital gains
rate). Also, as most investors would attest, it is much easier to save pre-tax dollars than post-tax dollars.

Take control of your retirement – to ensure that your investments outlast you
At Entrust, we encourage you to take control, choose your advisors carefully, and invest in what you know. No longer do your tax-advantaged investments need to be limited to the stock market –  indeed most of our clients buy and sell real estate, issue mortgages and buy notes and invest in private placements, LLCs, partnerships and a variety of other investments.

No longer should you be forced to pay commissions for decisions that you are making and remain undiversified by having all your investments exposed to stock and bond market risks. As with any investment, you may choose a more aggressive or more conservative strategy, but through the choices afforded through self-direction, you will likely be able to make a more informed decision.
Through maximizing your retirement and IRA contributions and self-directing into investments that you have properly researched, you have the capacity of building considerable retirement wealth all while deferring or eliminating taxation.

Best of all, self-direction can be accomplished through almost any type of qualified or IRA plan. Through the services afforded by a network of almost 30 offices nationwide, the Entrust Group provides a legacy of over 25 years of self-directed administration, unmatched in the industry.

Entrust sells no products, nor provides investment advice, ensuring true independent administration for its clients.

Glen Mather is the Director of Entrust Administration Services, Inc. serving East Florida.

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