retirement

7 retirement investing mistakes

Retirement » 7 Retirement Investing Mistakes

Holding on to the hoarding mentality
Holding on to the hoarding mentality © Faiz Zaki/Shutterstock.com

After decades of saving and investing, turning that lovely large account balance into a stream of income may hurt a little.

"I would at this point like to mention the A-word. That is the life annuity," Webb says. Very basically, immediate annuities are insurance against outliving your money. You give the insurance company a lump sum and they agree to give you a certain amount every year until you die. If you die early, they keep the money, generally.

"People view it as a risky gamble -- that they will lose if they die young," says Webb.

"The other thing is that people have trouble going from piles to flows. If I tell you that a lump sum of $1 million is going to give you an income of only $40,000 per year, your reaction is, surely that can't be right," he says.

The alternatives to annuities -- living off of interest and dividends or using the 4 percent rule for withdrawals -- can leave retirees subject to market whims or pursuing investment strategies based on their need for income instead of a prudent approach that optimally balances risk and reward.

Investing mistakes made during retirement can be much more detrimental to a retiree's standard of living than those made in the decades of working.

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