Two Crucial Retirement Mistakes to Avoid, Ep #68

There are two crucial mistakes I see people make with their retirement. The sad part is that these mistakes are completely avoidable with proper retirement planning. What are the two retirement mistakes? How can you avoid making them? Learn more in this episode of the Retirement Made Easy podcast!

You will want to hear this episode if you are interested in…

• [4:33] Check out RetirementMadeEasyPodcast.com for free resources
• [5:14] Mistake #1: Don’t invest all your eggs in one basket
• [13:54] Mistake #2: Financially relying on your pension

Mistake #1: Don’t invest all your eggs in one basket

A lot of people in St. Louis work for Boeing and may own shares of their company stock. Many also feel a sense of loyalty to their employer/company and invest far more than they should in company stock. I have nothing against being a shareholder. However, when you bet the farm on one single stock, you may not have a good outcome. You need to weigh how much you invest in one company very carefully.

I’ve known people who had thousands of shares of company stock in Worldcom, which went bankrupt. What happened to those shares? They’re worthless. Boeing started 2020 at $332 a share. It went to $95 a share during the COVID crisis. Many people owned company stock and had their retirement portfolios invested in Boeing. They didn’t know what to do. The moral of the story? Diversify. If you’re passionate about the company, it’s perfectly fine to own some shares. But limit it to 5–10% of your portfolio.

Safeguard your money with diversification

John Wooden was the UCLA Men’s Basketball Coach for 12 years. During 10 of those years, he won 10 championships. That will never be accomplished again. He and his then-fiance were saving for their wedding during the great depression. They finally reached the “magic” number where they could pay cash for their wedding.

So they walked hand-in-hand to the bank to withdraw the money. But the bank had closed overnight and all of their money was gone. The great depression had hit full force. Sadly, FDIC insurance didn’t exist back then and their funds weren’t insured. They lost it all.

Nowadays, the FDIC will insure up to $250,000 in a single bank account from financial loss. Anyone with more than $250,000 in a single bank account is taking an unnecessary risk. Split your money between multiple banks/bank accounts to protect it.

Mistake #2: Financially relying on your pension

Do you have a corporate or municipal pension? Most if not all of these pensions are under-funded, which means at some point the money will probably run out. I’ve had clients bring me the paperwork for their pensions only to find out that they’re 70% funded. It’s like getting on a plane and being told that you have a 70% chance of making it to your destination. What if the odds were 85%? I wouldn’t get on either airplane.

Many people with pensions get letters from their former employers saying they’re under-funded and that the retiree will unexpectedly start receiving less money. If a pension doesn’t offer a lump-sum option, it’s out of your control. If you do have a lump-sum option, you can be bought out and have more of a worry-free retirement.

If a pension is being paid out over 30 years, how much confidence do you have in it? If I was in this position, I’m not risking the success of my retirement on the positive outcome of a pension. There is far too much risk.

Resources & People Mentioned

• John Wooden