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Managing a retirement nest egg

By Jennie L. Phipps ·
Sunday, March 13, 2011
Posted: 10 am ET

My husband is looking hard at retirement and over the last two weeks, we've interviewed investment managers to help us figure out how to live off our savings.

Some of our friends have been surprised that we're looking for outside help. After all, my husband is a CPA who has spent most of his career in the insurance business where -- among other things -- he managed other people's money. But we think we're doing the right thing getting help because we can't afford to make big mistakes.

The process of identifying the right adviser has been enlightening and no matter what we decide, I've gathered some valuable retirement planning insights. Here are a half-dozen of them:

  1. Spending too much can ruin a retirement. My husband is a tight money manager, and we have designed a budget that I have no doubt we'll stick to. One adviser complimented us on having a clear-cut spending plan. "Indulging in too much retail therapy is an enormous retirement risk," he told us.
  2. Grandma was right about utility stocks. As billionaire Warren Buffett said about the continuing demand for basics like electricity and water, "Nobody stops flushing the toilet." Investing in the companies that provide these necessities is almost certainly a safe bet.
  3. Don't be greedy. In this market, seeking too much return on a relatively modest retirement portfolio means you have to accept a lot of risk. A conservative mixture of bonds and equities that pays 6 percent or 7 percent is achievable. Demanding more means you might not sleep well at night.
  4. Spread the money around. A good investment adviser ought to be able to explain to you how he's putting the money in a variety of pots that makes it less likely that you'll have simultaneous losses.
  5. Pin the adviser down on the fees. In the investment business, everybody gets paid. That's fair. But the adviser ought to be straightforward about the total amount you'll be paying. If he's not, keep pushing for that information. About 1 percent to 1.5 percent of the amount of money he's managing is average. If the total fees add up to a lot more, there ought to be a good explanation.
  6. Shop around. Every adviser has a different approach. Talk to enough people that you're satisfied that you'll be comfortable with your adviser's investment philosophy and his personality.
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