7 Investments to Avoid in Retirement, #112
In over 20 years of working with clients, I’ve seen people choose bad investments that have negatively impacted their ability to save for retirement. Don’t let that be you! On this episode, I’m going to take a look at seven investments that every retiree should try to avoid and the alternative investments that are more likely to lead towards successful saving.
You will want to hear this episode if you are interested in...
Is this life insurance product a waste of money? [1:47]
Don’t fall for false advertising [4:40]
Why hedge funds aren’t worth the risk [5:50]
Should you invest in crypto? [7:17]
The do’s and don’ts of annuities [8:39]
You can’t win if you don’t play [9:49]
Only trust the pros [10:48]
Insure your future
There are a lot of options out there when it comes to choosing investments that will help you save for retirement. That’s why it’s so important to know which ones to avoid. You don’t want to bank on something that could ruin all of your hard work and retirement planning. The first investment to avoid is private real estate deals. Typically, these are done between friends and family or a small real estate company which many find enticing. Truthfully, you can get fortunate. Sometimes these deals work out, but mostly they end up being money pits due to false advertising. Some common issues regretful investors run into are overpaying for a flipped property, hidden maintenance costs, and large vacancies that leave the properties disheveled. If you want to invest in real estate, buying individual properties you can control is the way to go.
Another investment to avoid is life insurance. Life insurance is a good idea for most people to have. Specifically, a term life insurance policy is the most economical way to ensure that your loved ones are taken care of after you're gone. However, cash value life insurance is something you definitely want to stay away from. Mainly pushed by career agents at large companies, the cash value component allows you to earn interest on a portion of your paid premium that can be withdrawn or borrowed against in an emergency. While that may sound useful, the large fees imposed for having the account or using the money significantly eats into any benefit you may receive. You will have a much higher chance of long term success with regular retirement investments.
Invest in reality
The third investment to avoid are hedge funds. For those unfamiliar, hedge funds quite literally hedge the risk in the stock market by using options or shorting a stock by betting it will decrease in value. For as long as I’ve watched the results of hedge funds, very few of them reach their expected potential. Sure, a select few will do well, but that’s a drop in the bucket compared to the unreliability of most hedge funds. In fact, hedge funds struggle to beat the returns of a simple index like the S&P 500. While they may seem like a logical “get rich quick” strategy, traditional stock and bond portfolios are a much better option to dependably save for retirement.
Finally, and probably most controversially, we have crypto currency. Crypto may be the hot button issue of the day, but does it make sense to have it as a retirement investment? Due to crypto’s speculative nature I think retirees should avoid it altogether. While Bitcoin and Ethereum may be the biggest names on the crypto market, many smaller digital currencies have lost 40 to 50 percent of their value. Crypto is also difficult to hold. Because most major financial institutions don’t support it, investors have to use crypto wallets like Coinbase, who charge an exorbitant broker commission of around 1.5% on every transaction. Crypto may be the currency of the future, but it's not stable enough to trust it with your future. Listen to this episode for more investments you should avoid in retirement!
Resources Mentioned
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