There’s an old Indian proverb that goes, “Tell me a fact, and I’ll learn. Tell me a truth, and I’ll believe. But tell me a story and it will live in my heart forever.” Story enables us to connect with concepts and make the unfamiliar, familiar. So in this episode of Retirement Made Easy, I’m going to share someone’s story to illustrate huge retirement mistakes her husband made that could’ve been avoided. She allowed me to share her story so that others could learn from it. Don’t miss this episode.
You will want to hear this episode if you are interested in…
- [5:15] Mistake #1: Canceling your life insurance policy
- [9:19] Mistake #2: Leaving your spouse in the dark
- [11:20] Mistake #3: Not diversifying your retirement investments
- [17:43] The right way to handle inherited IRAs
- [19:15] Mistake #4: Not having a plan for retirement
Mistake #1: Canceling your life insurance policy
This lady I spoke with lost her husband a few months prior to our conversation. He had made a series of bad mistakes with their retirement. She was 57 when he passed away at the age of 64.
A year before his death, he was in an accident and became disabled. Bills started piling up, so to cut costs, he canceled all of their life insurance. That was a mistake. Why? There’s a disability clause in most life insurance policies that allows the disabled person to stop paying premiums. He would have been able to keep the life insurance without paying the premiums.
At the time of his death, he was collecting disability from social security. Social security gives a spousal benefit, so if one spouse passes away the other gets a monthly survivor benefit—but that only happens if your spouse is 60. Because she was 57 when he passed away, she has to wait three more years to receive that benefit.
The moral of the story? Keep your life insurance in place until your spouse is at least 60 so if you pass away they have some benefits coming their way.
Question for thought: If something happens to me, will my spouse be okay?
Mistake #2: Leaving your spouse in the dark
We had to dig up all of their financial statements—retirement savings and accounts, mortgage accounts, CDs, etc. He had left his wife completely in the dark about everything. She didn’t even know how to pay any of the bills. She certainly didn’t know where anything was invested. It’s important that you keep your spouse informed about what’s going on and where everything is.
Question for thought: If something happens to me, will my spouse be able to maintain the household?
Mistake #3: Not diversifying your retirement investments
Fortunately, she was the beneficiary of her husband’s retirement accounts (with their children as backups). So what was the problem?
Her husband liked to do his own stock trading and investing. He invested over 90% of their life savings in ARKK. It’s a volatile fund invested in the technology sector. In 2020, this fund was up 152% and caught the eye of many investors. He shifted more than 90% of their portfolio to this one ETF. What happened?
In 2021, the fund was down over 23%. Sadly, in 2022, this fund is down more than 50% for the year. Even worse, prior to his death, the husband sold off shares of this fund to supplement his social security to pay their monthly expenses.
When you retire, your investments need to produce an income you can live on. This fund doesn’t produce a dividend. The fund isn’t diversified and is far too risky to invest all of your money in it. The biggest mistake he made is that he was chasing past performance. This almost always ends in disaster.
What is this woman supposed to do next? How can you learn from her story? Listen to the whole episode to learn more from her heartbreaking circumstances so you can avoid them.