The Wall Street Journal
Weekend Investor – Conquering Retirement – December 29, 2012
Five Big Retirement Mistakes
By Ellen E. Schultz
Here are some of the common errors made by current and future retirees:
Not paying for financial guidance.
This doesn’t mean that commission-based advisers are incompetent or unethical, but they do have a conflict of interest, and their inventory could be limited largely to products managed by their firm.
Fee-only advisers, by contrast, don’t earn commissions, are more likely to suggest low-cost investments from a larger variety of providers and will generally take a more holistic look at your finances.
Investing in something you don’t understand.
By the time you retire, it is likely that you understand at least the basics about stocks and bonds and are comfortable with mutual funds, Treasurys and certificates of deposit.
Variable annuities, for example, can sound pretty sexy (“upside potential, downside protection, tax-deferred!”). But you can still lose all your earnings, and the high fees for most broker and agent-sold variable annuities will chew up your returns, while the surrender charges can lock you in for years.
Supporting your adult children.
Low-balling elder-care costs.
Underestimating how much you will need.
Comments December 29, 2012
Eliminate conflicts of interest by hiring a privately owned Registered Investment Adviser (RIA). RIAs must accept fiduciary duty, legally obligating them to place clients’ interests first. Unfortunately, conflicts between shareholders and clients still exist with publicly owned RIAs. Fortunately, these conflicts do not exist with privately owned RIAs.
Most of the variable annuities sold by agents and brokers are loaded with high expenses and/or commissions. Alternatively, there are a number of no-load, no-commission, low-cost variable annuities. These more attractive variable annuities are generally available through RIAs that are prohibited from collecting commissions and are legally obligated to place their clients’ interests before their own interests.
Section 1035(a)(3) of the Internal Revenue Code provides that no gain or loss shall be recognized on the exchange of an annuity contract for another annuity contract. This means you a can a make tax-free exchange, commonly called a 1035 Exchange, from a bad annuity to a good annuity. Work closely with an experienced RIA to complete a successful exchange.
Aaron Skloff, AIF, CFA, MBA
CEO – Skloff Financial Group
Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA), Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.