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I recently met with a prospective client who came to discuss his retirement planning. He had clearly done his research, and he brought printouts of personal finance articles that he had come across in his many online searches. The articles all were of the same bent: Buy index funds and never sell them; be wary of investing outside of the United States, and keep your eye on the very, very long term.

I mentioned that it’s easy for these “experts” to sit in their ivory towers and tell you what to do, knowing that: No. 1, they will never actually sit across the table from a retiree; and No. 2, they will not have to clean up the mess if they are wrong.

For someone who actually has the responsibility of advising investors on their retirement, I just shake my head when I read another one of these articles. They tend to prescribe “one-size-fits-all” retirement solutions when, by definition, retirement solutions need to be personalized. What may work for you in terms of lifestyle and paying for that lifestyle has no relevance for your next door neighbor and his retirement plan.

In a future column I will discuss defining retirement goals and needs and how to set up an investment portfolio to achieve those goals. Here I would like to give three tips – what I call the “LID” – to help you get your retirement plan on track.

Losers-I can’t stress enough how important it is to have a portfolio that is tax efficient. A problem of long term buy-and-hold strategies is that they leave you with a huge tax bill due to capital gains. There is a term used for selling positions at a loss in your portfolio: it’s called “tax-loss selling.” It’s a process of selling securities at a loss to offset a capital-gains tax liability. Tax-loss selling may be the most important way to reduce your tax bill. For example, let’s say you have a gain in IBM (NYSE:IBM) stock and decide to sell it; you will be taxed on that gain in full. But if you have a loss in Bank of America (NYSE:BAC) and sell the stock, the amount of the loss may offset the gain in IBM, reducing the sum of the taxes owed.

Being smart with offsetting gains and losses can literally save you thousands of dollars a year. It’s important to speak with your accountant before moving ahead with the selling, so that you understand all the rules and restrictions that apply to tax-loss sales.

International- In a recent interview with The Wall Street Journal, Vanguard founder Jack Bogle came out against the need to diversify internationally.

Many US-based corporations profit from these markets, he said, which means that by investing in large US corporations you already have international exposure. I respectfully disagree. If that were the case, why haven’t these big multinationals seen a significant rise in their stock prices? As I have mentioned in the past, while the last 10 years have led back to where you started from in the US (“the lost decade”), the Asia-Pacific (NYSEARCA:EPP) region (excluding Japan) returned more than 200 percent, and Latin America (NYSEARCA:ILF) came in with a whopping 550% return. That stellar performance includes a drop of 60% during the middle of 2008. Many of the fastest-growing companies and economies are located internationally, so why not try and profit from that?

Dividends- This appeared in a report by Lebel Harriman:

According to S&P, the portion of total return attributable to dividends has ranged from a high of 53% during the 1940s – in other words, more than half that decade’s return resulted from dividends – to a low of 14% during the 1990s, when investors tended to focus on growth. If dividends are reinvested, their impact over time becomes even more dramatic. S&P calculates that $1 invested in the Standard and Poor’s 500 in December 1929 would have grown to $57 over the following 75 years. However, when coupled with reinvested dividends, that same $1 investment would have resulted in $1,353. (Bear in mind that past performance is no guarantee of future results, and taxes were not factored into the calculations.)

Enough said? The solid dividend payers with decades of consistent dividend growth, such as Chevron (NYSE:CVX) or Johnson and Johnson (NYSE:JNJ), now yield twice what you can get on an investment-grade corporate bond – and you have an even more attractive investment.

Blow the “LID” off your retirement, and hopefully you will be able to enjoy your golden years.

Source: Blow The LID Off Your Retirement Portfolio