10 Retirement Investing Mistakes to Avoid

Posted by Melissa Rubin in Retirement Investing.

Retirement investing is a long process that started in your first job when you were 22-years old. Now you finally get to use the investments you’ve saved away for and put them into new investments. Investing for retirement can be a whirlwind of ups and downs.

Jerry Miccolis, co-author of “Asset Allocation for Dummies” and chief investment officer at the wealth advisory company Brinton Eaton put together a list of retirement investing mistakes that seniors need to aware of.

Overlooking the importance of asset allocation – Many investors skip retirement asset allocation and instead build a portfolio buying securities they like.
Confusing diversification with asset allocation – asset allocation is diversification times ten. According to Mr. Miccolis, asset allocation involves picking asset classes (think stocks for retirement and retirement bonds) and subclasses/sectors that do not move in synch and then putting the right proportions of each in your portfolio. A retirement portfolio with all stock investments, for instance, probably is not properly allocated.
Neglecting to rebalance regularly – Once you allocate your retirement investing initially, make sure you edit the investments and keep it on track. Different assets grow at different paces.
Favoring short-term needs over long-term goals – retirement investing needs to be used for decades. Invest based on thinking about your long-term goals, income expectations and risk tolerance.
Letting your emotions control you – Especially in times of economic turmoil, investing for retirement in the long-run, and sticking to that, is extremely important.
Getting addicted to financial media – According to Miccolis, taking in every word from financial news 24/7 in unhealthy and will leave you paranoid, thinking you need to change your investments every few hours.
Chasing performance - Buying the latest hot stock or sector is like “driving a car by looking in the rear view mirror,” Mr. Miccolis said in a statement. Generally, by the time you know it is hot, it is old news and there is not much profit left in it.
Trying to outsmart the market – According to Miccolis, studies have shown that active management underperforms passive management in the long term.
Disregarding tax implication while investing – Not taking advantage of lower tax rates for long-term capital gains, like Roth IRAs, is something that many people ignore and pay the price for – in taxes- later in life.
Allowing caution to supersede the reality of inflation – Inflation is a huge consideration in choosing where to invest your retirement. Money funds, CDs and Treasury securities will not keep up with inflation over the long haul.