Three Mistakes Soon-To-Be Retirees Make
High Yield Stocks, passive income, Retirement, REITs
Seeking Alpha Analyst Since 2006
I am a former Investment and Commercial Banker with over 35 years of experience in the field. I have been advising both individuals and institutional clients on high-yield investment strategies since 1991. I am the lead analyst at High Dividend Opportunities, the #1 service on Seeking Alpha for 6 years running.
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In addition to being a former Certified Public Accountant ("CPA") from the State of Arizona (License # 8693-E), I hold a BS Degree from Indiana University, Bloomington, and a Masters degree from Thunderbird School of Global Management (Arizona). I currently serve as a CEO of Aiko Capital Ltd, an investment research company incorporated in the UK. My Research and Articles have been featured on Forbes, Yahoo Finance, TheStreet, Investing.com, ETFdailynews, NASDAQ.Com, FXEmpire, and of course, on Seeking Alpha. Follow me on this page to get alerts whenever I publish new articles.
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- Three mistakes loom over your retirement planning.
- You may be in retirement now and these errors are causing great consternation in your life.
- How can you fix them before they wreck your retirement.
I've been doing this for long time. I don't say that to brag, but to build a foundation for what I am going to be talking about. I often get questions from my over 4400 High Dividend Opportunities members as well as free readers and the general public.
Retirement is a big deal. You spend your life saving for it or you spend your later years stressing over it. Sometimes you do both!
Often people here about so many types of investing and their focus. Total return. Dividend Growth. Immediate income (our focus). Momentum. Growth. Contrarian. The list can go on and on.
Before you even tackle any of that, mistakes in the foundation of your retirement plan are frequent.
Mistake One: Under-Estimating Spending and Expenses
The first step you should take in planning your retirement, especially as it draws near is making a budget. What do you expect your expenses to be before your additional pleasure spending. Will you set yourself a budget on how much miscellaneous extra spending you will do?
The biggest mistake you can do is to under-estimate how much life will cost. Bills are a relentless part of life. Internet, TV shows, power, cell phones - none of these things operate for free.
Some companies will offer budget billing - this is offered by many power utilities - where you pay a flat rate every month but often you actually spend more than the variable option. The ease of budgeting vs the loss of some cash.
I suggest when you sit down and make a budget is to look over two years worth of bills and expenses and instead of taking the average. Take the most expensive power bill, water bill etc and use that as your base for your budget. Its better to over-estimate expenses than under-estimate them.
Mistake Two: Over-Estimating Income and Dividends
The second mistake works hand in hand with the first. If expenses are money flowing out of your life, income and dividends are money flowing in. As humans we love to expect the best from our income flow. I admonish you to plan for the worst.
Over-estimating your Social security, pensions, annuities, dividends, side-hustle, rental income etc will lead to a stressed budget and finances. You should aim for your income stream to strongly outperform your budgeted expenses in the event that you lose one or two of your income sources. Perhaps your rental home goes empty in for months, or you have to evict an non-paying tenant. Many the company offering your annuity goes under and its lost. Black swan events force us to diversify our income sources. The age-old saying of not putting all your eggs in one basket applies strongly here.
Mistake Three: Investing The Same as Before
When a life event occurs, priorities are shifted and lifestyles must change. When you welcome a new baby into your life, your friendships will often drastically be realigned. Why? You've reached a new life stage and often friendships are defined by which life stage you exist in.
Likewise, your investment philosophy or goals may need to be realigned. Those who had a heavy emphasis on the speculative may need to reign in that nature and become more conservative. Not because of fear, but because they are not pulling in a bi-weekly check in the event something goes south.
Likewise, those investing in slow and steady dividend growth stocks may realize those options cannot provide the income necessary to cover their bills. As such some trimming and adjusting is needed.
This is where High Dividend Opportunities plays its biggest part. Often readers assume our Model Portfolio is completely set up as a "Higher Risk/High Reward" proposition. They fail to realize we have sections of our portfolio tailored to lower-risk investors. Those who want mostly bonds, baby bonds and preferreds will find a plethora of options.
We suggest allocations to each section for more aggressive to most conservative of investors so your risk-tolerance is kept in mind. This way you maximize the benefit of Immediate Income investing and minimize the risks as much as possible.
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A Short Explanatory Video
I often get asked what exactly High Dividend Opportunities has to offer and who would really benefit from it. So I and my team decided to make a brief video that would help answer those questions. I think it is a must-see for all retirees and investors planning for their retirement. Take a look for yourself and let me know what you think!
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When you change your perspective, you can change your life. We've had countless retirees tell us their income stream is larger, life is less stressful and they don't feel the need to be panic-driven tied to their brokerage screen monitoring every changing pixel of market value. They sit back, enjoy life and recognize what wealth really is.
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