7 Mistakes to Avoid When Planning for Retirement
According to Michael Davis, CEO of Davis Financial Services, Inc., the secret to making money work for you doesn't start with earning a large paycheck it starts with knowing how to keep it.
Here are 7 costly mistakes Davis says retirees should avoid in order to reach a successful retirement.
Mistake #1: Invest as though you're still working
Retirees are urged by nearly everyone, except perhaps brokers, to switch from a mindset of accumulation to preservation. Davis recommends following the "Rule of 100" to ensure savings are never entirely at risk: Take your age, subtract it from 100, and that is the percentage of your assets you can invest on the market with relative safety. Keep in mind, however, that the "Rule of 100" is just a guideline.
Mistake #2: Ignore significant financial drops
Again, the key here is to preserve your assets and ensure youve got an adequate buffer to weather tough times.
Mistake #3: Not guaranteeing your basic income needs
Mistake #4: Not paying attention to your portfolio costs
Mistake #5: Ignoring taxes
In response to harsh tax climates, Davis says his favorite financial instrument for retirees is the hybrid annuity. They offer growth potential that is linked to several indices such as the S&P 500 and have a principal guarantee, which means hybrid annuity holders literally cannot lose money provided they don't surrender their contracts during the surrender charge period and incur surrender fees.