5 ways to squander your nest egg in 2014
Wasting, depleting and frittering away your hard-earned cash is easy with these money moves.
The biggest fear -- by far -- of those approaching or in retirement is outliving their money. It's a legitimate concern, considering the average American can expect to keep kicking for 78.6 years and that cushy $1 million nest egg doesn't cut it anymore.
We all need to work longer, save more and hope that Social Security can still pitch in when we finally punch the clock for the final time. If along the way we realize we're coming up short of our goals, the game of catch-up can lures investors into putting their hard-earned money where it doesn't belong.
That could mean investing in risky stocks or too-good-to-be-true investment schemes. Either way, knowing what not to do is as important as knowing what to do.
Here are five sure-fire ways to squander your nest egg in the coming year:
Squander No. 1: Put that nest egg into Bitcoin and triple it!
Yes, it's the exciting new virtual currency, and duly legitimate. Get in now. Huge profits await the tech-savvy. Blah, blah, blah.
Fidelity, one of the biggest holders of retirement assets with some $4.2 trillion in IRAs, just announced that it is no longer allowing Bitcoin investments in IRAs. In other words, it used to. Yikes. Apparently for some time, investors could direct money into SecondMarket's Bitcoin Investment Trust, an open-ended trust launched in September. It attracted $62.6 million of real, tangible currency into a fund based on cryptographic-backed virtual currency.
Sounds like a disaster waiting to happen. It's one thing to invest in Bitcoin with "play" money that you can afford to lose. It's a whole different story when your goals are preservation and growth.
Squander No. 2: Inhale medical marijuana stocks
Your Baby Boomer friends from pot-legal Colorado are telling you that investing in medical marijuana companies is a can't-lose proposition. And everyone's doing it! Get in before it's too late!
Granted, the industry is budding, pun intended, but the over-the-counter stocks are so thinly traded and without track records, it’s best not to inhale just yet. "Just say no" to: Medical Marijuana Inc. (MJNA), GreenGro Technologies (GRNH), Growlife (PHOT), Cannabis Science (CBIS), MediSwipe (MWIPD) and CannaVest Corp. (CANV).
Squander No. 3: Pour it into your employer's stock
For this lesson, let’s go back to December 2002 when Enron filed for bankruptcy protection. Some $1.2 billion in 401k assets allocated to company stock by loyal employees disappeared into thin air, an event as equally slimy as any one of its oil spills.
Many of the company’s most loyal kept all or huge portions of their savings in Enron stock. Meanwhile, Enron executives had lied about the true financial state of the company, disallowed employees to sell stock and walked away with hundreds of millions of dollars. Moral of the story: Do not allocate more than 10% of your 401k assets in company stock. If matching funds come in that form, sell the shares and spread the proceeds among other holdings. Show loyalty by showing up on time, giving 100%, and attending the annual holiday party—just don’t put a lampshade on your head.
Squander No. 4: Sign for a nice annuity
I[ll never forget when my 75-year-old father called to see what I thought about putting his retirement money -- already in an IRA -- into an annuity at his bank's insistence. The mere thought that someone my father had trusted to make investments in his best interest had pushed him in this direction made my skin crawl.
Keep in mind, annuities are investment vehicles packaged in insurance wrappers. You don’t buy annuities; someone sells them to you, and—as such—they often deliver handsome commissions to the broker. Among the most expensive products you can own, fees can be as high as 15%.
For example, if you put $100,000 into an annuity, $15,000 of that can come right off the top and into the salesperson’s pocket. Plus, if you need to tap into your money before an annuity matures, expect to pay another 3% to 5% to access it…which is why an annuity would have been an absolutely nightmarish move for my father. Make sure it isn’t one for you.
Squander No. 5: Fry your nest egg on high fees
Some of you prefer to use mutual funds in your portfolio, a perfectly good way to diversify and avoid the "all-Enron" approach to investing. However, paying unnecessary fees can eat away at your capital.
Load funds are one of the most deceptive rip-offs out there. A back-end load or (B share) means a fee is charged when you sell the fund; a front-end load (A-share) means the fee is charged up front.
A fee is a fee is a fee. You can avoid them. You can buy a no-load, low-fee variety that tracks the same indices or asset class as the more expensive counterpart. Some of the best come from Vanguard, T. Rowe Price, Fidelity and Pimco. If your broker tells you otherwise, find another broker, or put your money in a discount brokerage such as E-Trade, TD Ameritrade or Schwab.
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1) budget just like congress
2) go on vacation just like the Obamas
3) go tanning as much as John Boehner
4) go shopping as much as Michelle Obama
5) invest in US Treasuries as much as the Fed does
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hold water.I feel sorry for you jealous repubs who are on the outside looking in.
The Four (4) quickest ways to squander a fortune...ARE,
She hasn't left me yet, so I still have a lot left...
Grandpa wanted to be buried with his money....
So just before closing his casket, Dad wrote him a check and put it in his shirt pocket..
I did the same to Dad...
Put your money in the market and watch the Dow hit 20,000 by the end of Obama`s term.
The Dow`s up 98% with Obama.The only people who don`t like Obama are the ones too stupid
to invest in the market when Obama took office.BOO HOO HOO is their cry.
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