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Retirement norms are changing. Retirees can no longer rely on the old mechanisms for generating sufficient retirement income such as the 4% withdrawal rule or returns on market investments. People are also living longer, which means that finding a sustainable source of retirement income is now more crucial than ever.
What’s worse — advisors are becoming wiser at manipulating retirees into making financial moves that, in a matter of years, can deplete what took decades to build. Here are four things retirees need to be wary — and aware — of when it comes to their investments. (For related reading, see: Should I Invest in a Hybrid Fixed Indexed Annuity?)
High Fees
One of the first careless mistakes retirees make is neglecting to thoroughly read and vet financial product contracts to ensure that they will not lose significant funds in hidden fees. Advisors lure their victims in with promises of higher or guaranteed returns (or sign-up bonuses which typically take years to obtain, a detail they may forget to highlight), and in return retirees roll their money into investments that may cost more than their current investments. For example, advisors like to suggest variable annuities for IRA rollover dollars or pension funds, which they will probably suggest you take out in a lump sum before investing. These insurance products let the investor pay into mutual fund sub-accounts, letting returns grow tax-deferred until withdrawal.
