Join Early Retirement Today
Reply
 
Thread Tools Display Modes
10 Common Retirement Mistakes
Old 01-03-2007, 07:23 AM   #1
Confused about dryer sheets
 
Join Date: Jan 2007
Posts: 8
10 Common Retirement Mistakes

Here is some tips of 10 common retirement mistakes..
it's quite helpful i guess..
http://www.ibtimes.com/articles/2007...t-mistakes.htm






wog777 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: 10 Common Retirement Mistakes
Old 01-03-2007, 07:37 AM   #2
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,635
Re: 10 Common Retirement Mistakes

Just more PCS (Plain Common Sense). What is the next page "come to us" we will take care of your money for you? At a substantial fee, of course. Most on this board have all of this, except the part about using a Financial Manager, memorized by now.

Lots of "do's" and "don't" to identify the problems, but no much offered in the way of solutions.
__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-03-2007, 07:55 AM   #3
Recycles dryer sheets
 
Join Date: Nov 2004
Posts: 117
Re: 10 Common Retirement Mistakes

"Although it is nice to have confidence in oneself, you should not take a risk with poor planning... It is worth the money to hire an advisor for assistance. "


Don't risk poor planning. Hire an advisor and GUARANTEE poor planning!
slepyhed is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-03-2007, 08:00 AM   #4
Recycles dryer sheets
 
Join Date: Nov 2004
Posts: 117
Re: 10 Common Retirement Mistakes

Another one:

"If somebody came up to you, placed $1000 on the ground, and told you take it, wouldn’t you pick it up?"

Not really accurate. Should be:

If somebody came up to you, Placed $1000 on the ground, and said, "If you give me $2000 right now, I'll pick up that $1000 for you and you can have it all back in 30 years"....
slepyhed is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-03-2007, 08:04 AM   #5
Gone but not forgotten
 
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 11,447
Re: 10 Common Retirement Mistakes

Luckily my late husband took the last hint seriously or I would still be slinging bedpans .
Moemg is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-03-2007, 09:00 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
samclem's Avatar
 
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
Re: 10 Common Retirement Mistakes

Quote:
Originally Posted by slepyhed
Don't risk poor planning. Hire an advisor and GUARANTEE poor planning!
Well, I'm no fan of the FP industry, but this might go a little farther than I'd go. Given the state of knowledge/interest of most poeple, solid advice and a little motivational speaking to get them to save is probably needed (even if only a few % actualy do anything, it would be an improvement. The others would at least know what they aren't doing right). The biggest problem is that discerning the true, good planners from the salesmen requires a fairly thorough understanding of the issues. Once you've gone to the trouble to get that understanding, it usually is advantageous to just do the work yourself rather than search for a "good" FP, meet with him/her, explain your situation, and then pay for his/her time.
samclem is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-03-2007, 09:02 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,483
Re: 10 Common Retirement Mistakes

Quote:
Originally Posted by slepyhed
Another one:

"If somebody came up to you, placed $1000 on the ground, and told you take it, wouldn’t you pick it up?"

Not really accurate. Should be:

If somebody came up to you, Placed $1000 on the ground, and said, "If you give me $2000 right now, I'll pick up that $1000 for you and you can have it all back in 30 years"....
A bit cynical, aren't we..............or a general mistrust of EVERYONE in society..........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-04-2007, 08:29 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 7,677
Send a message via Skype™ to kcowan
Re: 10 Common Retirement Mistakes

Quote:
2. Trying to plan it alone A common mistake that many people face is trying to plan out their retirement without aid from a professional. Although it is nice to have confidence in oneself, you should not take a risk with poor planning. Retirment is 20+ years of your life. It is worth the money to hire an advisor for assistance.
We used professional advice 20 years ago. While there were some good aspects, they fell short on the emphasis on savings and the choices of investments.

Quote:
7. Not planning your retirement lifestyle It is absolutely essential that you try to forecast your expenses during retirement. Blind faith will not keep you from running out of money, even though that would be nice. Retirement takes planning. How can you know how much to save if you do not know how much you will spend?
I think this is very unrealistic. On the one hand, the planning should take place in your 20s before you have established your working lifestyle. Any estimate of retirement lifestyle will be misleading at best,

We have been retired for four years now and we are still planning our lifestyle. OTOH if they present scenarios such as trailer-park living, that might help frame the thinking in terms of options. It might even fall under item 2 if the park is Briny Beach
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-05-2007, 02:28 PM   #9
Thinks s/he gets paid by the post
Jay_Gatsby's Avatar
 
Join Date: Oct 2004
Posts: 1,719
Re: 10 Common Retirement Mistakes

I think I'm getting the best (or worst, depend on your perspective) of both worlds -- I'm marrying my financial planner.
__________________
He had one of those rare smiles with a quality of eternal reassurance in it . . . It faced, or seemed to face, the whole external world for an instant and then concentrated on you with an irresistible prejudice in your favor. -- The Great Gatsby, F. Scott Fitzgerald
Jay_Gatsby is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-05-2007, 02:54 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
mickeyd's Avatar
 
Join Date: Apr 2004
Location: South Texas~29N/98W Just West of Woman Hollering Creek
Posts: 6,671
Re: 10 Common Retirement Mistakes

Quote:
9. Ignoring inflation Just because you stopped earning money does not mean that inflation stops. You will be horribly surprised when you run out of funds, because you did not calculate for inflation. My dad could buy a hamburger for 10 cents when he was a child. I hope he did not think that was going to last.
This is the most difficult thing to get across to DW. This is a woman with 2 university degrees. She had no trouble grasping the 4% SWR, but the fact that inflation at 3.5% will drive that puppy up each year is an obsticle that she seems unable to get over.

Just last night she says "If we will be making 10% on our investments and only taking out 4% each year, we will be able to leave a ton of money to the kids won't we."
__________________
Part-Owner of Texas

Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx

In dire need of: faster horses, younger woman, older whiskey, more money.
mickeyd is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-06-2007, 10:30 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 7,677
Send a message via Skype™ to kcowan
Re: 10 Common Retirement Mistakes

Quote:
Originally Posted by mickeyd
Just last night she says "If we will be making 10% on our investments and only taking out 4% each year, we will be able to leave a ton of money to the kids won't we."
I think she is right. It is only if the gap drops that she might be wrong.

The key error here is that an inflation of below 10% will mean you are improving your net worth every year. For every $1 million of starting assets, you will have $8.4 million after 30 years, and $19.7 million after 40 years:

Such is the power of compounding! Plenty left for the kids...
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-06-2007, 11:31 AM   #12
Recycles dryer sheets
 
Join Date: Sep 2006
Posts: 142
Re: 10 Common Retirement Mistakes


I think the easiest way to think about portfolio growth is to take the average return (10%) and subtract out inflation (3.5%) and the SWR (4%). That results in 2.5% of "contribution" to real growth of the portfolio.

But wait there's more... You need to pay taxes on the entire 10% return (say 15%), which means you lose 1.5% (of the 2.5% growth). That leaves you with only 1% real growth in the portfolio despite a 10% gross return. (as an aside, you can see why reducing investment expenses by .5-1% makes such a big difference).

This shows the insidious effect of inflation on portfolio growth. You need to pay taxes on the part of the return that's only used to keep the real value of the portfolio steady.

Oh, and one last thing... This all assumes a steady return of 10%. Unfortunately, market returns are volatile and volatility (std deviation) does bad things to ending portfolio values. I'd much rather get a 10% return with 2% standard deviation than a 10% return with 12% standard deviation. if you don't believe me, try out one of the monte carlo retirement calculators and notice the effect on of high volatility on your ending portfolio value.

Jim
magellan_nh is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-06-2007, 04:28 PM   #13
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,635
Re: 10 Common Retirement Mistakes

Guess this should be in another thread.... Think I will go start it. Something like when does one stop saving -- you ain't going to live forever.
__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-07-2007, 09:16 AM   #14
Full time employment: Posting here.
 
Join Date: Feb 2006
Posts: 987
Re: 10 Common Retirement Mistakes

Quote:
Originally Posted by Old Army Guy
Guess this should be in another thread.... Think I will go start it. Something like when does one stop saving -- you ain't going to live forever.
I think it is automatic. The day you die is the day you stop worring about tomorrow - thus the day you stop saving !

- Ron
rs0460a is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-07-2007, 01:11 PM   #15
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,337
Re: 10 Common Retirement Mistakes

Quote:
Originally Posted by Old Army Guy
Guess this should be in another thread.... Think I will go start it. Something like when does one stop saving -- you ain't going to live forever.
I'd rephrase the question to cover when do you go for more than a 4% SWR. Many studies show a drop off in spending as we age. Deferring retirement to get enough for the full "desired" retirement lifestyle at a 4% withdrawl rate means you are probably working longer than necessary and/or unnecessarily restricting the early phase of your retirement lifestyle.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-09-2007, 08:00 AM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,006
Re: 10 Common Retirement Mistakes

Expecting an average rate of return of 10% going forward is seriously misguided. If we're lucky, we might see 7 or 8%. Now take SWR, inflation and taxes out of that, and it looks like you are treading water!

Audrey
__________________
Retired since summer 1999.
audreyh1 is online now   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-09-2007, 10:45 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 7,677
Send a message via Skype™ to kcowan
Re: 10 Common Retirement Mistakes

Quote:
Originally Posted by magellan
I think the easiest way to think about portfolio growth is to take the average return (10%) and subtract out inflation (3.5%) and the SWR (4%). That results in 2.5% of "contribution" to real growth of the portfolio.
The reason I did the simple spreadsheet is to avoid the mistake in this thinking. Inflation only applies to your spending. So SWR of 4% will decline as the portfolio returns more than 3.5%. Plus the easiest thing to focus on is spending because investment returns are influenced by many things outside our control.

In our financial plan, I use the average inflation over the last ten years. I also use an investment return of 7%. And I plan for capital adjustments such as new cars in the year I expect to buy them.

And taxes only apply to the taxable returns you achieve so you can delay taxes on capital gains until you actually have to crystallize them. If you assume all your portfolio returns are taxable, then you need to reassess you investment strategy. Tax deferral can make a major difference in overall returns.
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-10-2007, 08:44 AM   #18
Recycles dryer sheets
 
Join Date: Nov 2004
Posts: 117
Re: 10 Common Retirement Mistakes

Quote:
Originally Posted by magellan
...
Oh, and one last thing... This all assumes a steady return of 10%. Unfortunately, market returns are volatile and volatility (std deviation) does bad things to ending portfolio values. I'd much rather get a 10% return with 2% standard deviation than a 10% return with 12% standard deviation. if you don't believe me, try out one of the monte carlo retirement calculators and notice the effect on of high volatility on your ending portfolio value.

Jim
Volatility doesn't *always* do bad things to your portfolio. It adds uncertainty! I think those ending portfolio values you are seeing from the mote-carlo calculators are potential worst-case ending values. Best case ending values would be stratospheric! Hopefully your experience will fall somewhere between those two extremes.
slepyhed is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-10-2007, 12:52 PM   #19
Recycles dryer sheets
 
Join Date: Sep 2006
Posts: 142
Re: 10 Common Retirement Mistakes

Quote:
Originally Posted by kcowan
The reason I did the simple spreadsheet is to avoid the mistake in this thinking. Inflation only applies to your spending. So SWR of 4% will decline as the portfolio returns more than 3.5%. Plus the easiest thing to focus on is spending because investment returns are influenced by many things outside our control.
kcowan,

I still stand by my logic, although reasonable people can differ as to how to best visualize this problem.

My point was that you can remove the inflation variable from the equation by subtracting it out of the portfolio growth rate up front. Maybe you don't find this intuitive and would rather focus on the spending side, but calculation wise, it's six for one and half-a-dozen for the other (except for taxation differences).

The engine that powers spending in retirement is the portfolio balance. The horsepower of that engine is affected by the portfolio's real rate of growth. As a portfolio's real rate of growth diminishes (especially below zero), the likelihood of retirement ruin increases, especially for longer retirements.

One reason we might see this problem differently is that I retired in my early 40s, so my time horizon is very long. I need to stay focused on keeping our portfolio's real value from declining or else my odds for success aren't good.

Jim
magellan_nh is offline   Reply With Quote
Re: 10 Common Retirement Mistakes
Old 01-10-2007, 01:05 PM   #20
Recycles dryer sheets
 
Join Date: Sep 2006
Posts: 142
Re: 10 Common Retirement Mistakes

Quote:
Originally Posted by slepyhed
Volatility doesn't *always* do bad things to your portfolio. It adds uncertainty! I think those ending portfolio values you are seeing from the mote-carlo calculators are potential worst-case ending values. Best case ending values would be stratospheric! Hopefully your experience will fall somewhere between those two extremes.
slepyhed,

The ending portfolio values output from monte carlo calculators are usually median portfolio values (half of trials are higher and half are lower). But ending portfolio value isn't really the issue. The real issue is that most people want to make a retirement plan that has a high likelihood of success, like 85% or higher, instead of just a 50/50 chance of success. I didn't do a good job of emphasizing that in my original post.

If you want your retirement plan to have a high probability of success, increasing volatility is going to reduce your SWR. In addition, portfolio returns usually suffer from kurtosis or negative skew, so the effects of volatility would likely be even worse than a simulator shows.

Jim
magellan_nh is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Tax Policy Promotes "Early" Retirement REWahoo FIRE and Money 19 07-21-2017 02:10 PM
Should a married couple have individual retirement investing plans? Anaya_1de Young Dreamers 28 12-05-2006 07:57 PM
Vanguard Adding More Target Retirement Funds Lusitan FIRE and Money 23 03-21-2006 06:17 PM
Targeted retirement funds - I don't get it. HBH FIRE and Money 7 03-11-2006 01:58 PM
Scott Burns: Stay safe on retirement spending PL FIRE and Money 49 12-22-2004 10:59 AM

» Quick Links

 
All times are GMT -6. The time now is 10:38 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.