Client Update

Do-it-yourself retirement planning

By Steven Elwell

July 2008

Upon retiring most people follow the good advice of rolling over their 401ks to IRAs.  This makes sense because IRAs have many more investment options and potentially lower expenses (potentially higher too).  The question then becomes: What do I invest in?  There is a simple answer – hire a Registered Investment Advisor. 

Many people try investing on their own, and some have done quite well, but the majority of people don’t know a commodity from a treasury bond.  For example, consider Mary:  she decides to retire early and “live off her investments” until her pension kicks in.  She starts to manage her nest egg in 2002 and invests in REITs, Canadian oil and gas trusts, and shipping stocks all because of tips she got when she joined several “expert” message boards on AOL and Yahoo!  To some it seems obvious that when we need “expert” advice we should turn to Internet message boards for the answers.  She wakes up at 5:30 a.m. to check the foreign markets and spends several hours every day managing her investments.  Mary got pretty lucky and doubled her nest egg by 2006, even with withdrawals.  Nice job Mary! See, investing isn’t that hard (just listen to the message boards right?). 

Funny thing about investing though, good guesses are great but one bad guess can get Mary in big financial trouble.  Remember the employees of Enron who had most of their retirement plan investments in company stock?  Imagine how that would feel. Mary worked all her life to sock away this money so she can do what she wants in retirement and now she is waking up early every day to spend hours analyzing investments just to lose most of it.  It doesn’t sound like an ideal retirement.

The lesson here is why take the chance?  Retirement should be worry free.  If you don’t know what you’re doing but try to invest yourself you have a better chance of success betting all of your money on black in a game of roulette.   Do-it-yourself retirement rarely works. Instead, consider hiring a Registered Investment Advisor. There are no second chances, do-overs, or mulligans in the investment world.