Repeating History: 10 Investor Mistakes

By Brad Thomason, CPA


I recently came across in an interesting item while going through some of our archive files.  It was a re-print of a story which first appeared in the Wall Street Journal in October of 2001.  The title is, “Cracks in the Nest Egg:  A look at the biggest mistakes investors are making with their retirement savings.”

Here is the 10 item list they identified (with my parenthetical comments added for additional context):

  1. Failing to consider long-term (health) care needs
  2. Failing to consider the effects of inflation and taxes
  3. Failing to take advantage of the years immediately before retirement (to try to catch up on previous under-funding)
  4. Making large loans to family or friends
  5. Overestimating how much you can withdraw from your nest egg
  6. Overmanaging a retirement portfolio
  7. Taking too much risk with investments
  8. Underestimating life expectancy
  9. Underestimating expenses in retirement
  10. Focusing on your nest egg to the exclusion of all else

All in all I think this is a good list.  It is the rare case anymore that I read something that I agree with in totality, but I have to say this comes pretty close.

I decided that this list was good fodder for a blog post, for the simple reason that a lot of people are still impacted by these challenges.  And a lot of people giving financial advice still churn out “plans” which don’t address all of these factors.

The work I do over in my CPA practice focuses heavily on this area (here’s a link to our Retirement Income Mapping work, over on the other site).  So in addition to what I read and hear from industry contacts, I see this stuff first hand in my own office.  Despite the fact that this list was published more than a dozen years ago (and by the way: it wasn’t new news on the day it came out…), it is still very timely.  Guess history really does repeat itself.

How about you?  Do any of these look familiar?

It is important to note that awareness of a problem and corrective action are two very different things.  One is pretty easy by comparison.  Then again, awareness is the first step in getting to most corrected states, so having a list like this can serve as a good road map for identifying which aspects need some work.

No one has a perfectly composed and executed financial plan.  So my advice to my clients is to not get too caught up in the fact that there may be some work to do.  But I also tell them that if we know what needs to be worked on, it’s probably a good idea to start chipping away at it sooner than later.  Most of the problems associated with managing finances in retirement are not the kind that go away on their own.  To the contrary, a good many of them get worse if inattention remains the status quo as time marches on.



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