The Most Common Retirement Mistake: Financial Advisors' Daily Digest

by: SA Gil Weinreich


Retirees often unthinkingly just hand over their 401(k) to their company’s provider without a professional’s advice.

Market volatility so far into the year arguably creates a more propitious environment for active management.

One contributor explains why you don’t need lofty sums to retire.

The debate over active vs. passive investing will go on and on, but regarding passive investors, the verdict is in: They need a professional on their side.

That is the conclusion of certified financial planner and insurance specialist Henry Montag, who writes that at the definitive moment of actual retirement from one's company, investors tend to allow themselves to be steered by the HR officer into checking off an easy-to-execute option (i.e., working with the company's product provider) rather than the optimal option (i.e., shopping around for immediate annuity quotes).

While we're on the subject, S&P Dow Jones Indexes does in fact focus on the perennial question about active vs. passive management with an interesting take, arguing that it's not just manager skill at issue but the "level of opportunity to demonstrate that skill," which varies from year to year. Trends in market dispersion - the relevant metric in S&P's analysis - suggest that "2016 could at last see the long-awaited stock pickers' market and a widening of the gap between top and bottom performers."

Several SA articles have recently discussed and debated how to generate $1 million for a retirement portfolio. George Schneider argues that retirees really don't need to achieve that high a sum for retirement security; $411,600 worked just fine for him, and he says the real key is saving and investing in dividend-paying companies until one's full Social Security benefit age of 66.

Before we leave the topic of saving, investing and retirement, I note briefly my favorite article this week from an esteemed colleague who took the risk of baring her soul, as it were, financially - and asking for personal financial advice (she got quite a lot, as it turns out). In the thick of a difficult personal situation, it's easy to assume that things will continue that way, but that's not usually the case. Life is full of ups and downs-including in one's personal finances. She will marvel one day at how wonderfully her situation changed in a positive and sustained way.

In market news, Lance Roberts says we're 4% from the top. He admits that his emotions are "screaming" to buy but worries the market is overbought. John Hussman calls the market "obscenely overvalued." Kurt Dew, on the other hand, thinks none of that matters, as he expects that the Fed will be priming the pump in an election year to re-elect the party in power.