RavaBombs: The Retirement Tax
RavaBombs are over-the-phone annuity sales pitches to trusting financial advice clients. They're a lose-lose proposition for investors, but a huge payday for financial advisors.
The pitch typically starts with a lecture on the importance of diversification. The advisor will then recommend a mix of investments, including a guaranteed portion, a bond fund, and a balanced mutual fund.
The guaranteed portion is usually an annuity, which is a complex financial product that pays out a fixed income stream in retirement. Annuities are often sold with high commissions, and they can be difficult to get out of if you need your money.
The bond fund is supposed to provide stability and income, but it's important to remember that bond prices can fall when interest rates rise. If you're in an extended period of low rates, only one thing can happen: rates rise. As interest rates rise, the value of your supposedly safe bonds falls.
The balanced mutual fund is supposed to offer a mix of growth and income, but it's important to remember that mutual funds can underperform the market during both good times and bad times.
In short, RavaBombs are a way for financial advisors to make a lot of money by selling investors expensive products.
Why most people don't need a financial advisor
Most people don't need a financial advisor. If you're a good saver and investor, you can create your own financial plan and manage your own investments. Poor savers are not going to change, no need to pay someone to be disappointed with you!
Financial advisors can be helpful for people with complex financial needs, such as high-net-worth individuals or those with complex estate planning needs. However, for the majority of Americans, financial planning is a personal process that we can work through on our own.
A fouls game, Financial Advisors are nothing but a retirement tax!
Financial advisors charge a variety of fees, including commissions, management fees, and advisory fees. These fees eat into retirement savings over time.
There's no reason to pay someone to manage your retirement savings for you. Vanguard funds are likely the most logical funds I would use in my own portfolio!
How to retire with more money
The best way to retire with more money is to save and invest early and consistently. Take risks when you are young, and walk those risks back as you get married, start a family, and approach retirement!
Here are a few tips:
- Start saving for retirement as early as possible. The sooner you start saving, the more time your money has to grow.
- Invest in a variety of assets, such as stocks, bonds, and real estate. This will help you to reduce your risk.
- Avoid high-fee products, such as annuities, managed accounts, Mututal funds, and insurance products.
- Rebalance your portfolio regularly to ensure that it still meets your risk tolerance and investment goals.
Conclusion
Financial advisors are not necessary for most people. If you're a good saver and investor, you can create your own financial plan and manage your own investments.
If you do decide to work with a financial advisor, be sure to do your research and choose someone who is a fiduciary, meaning they are legally obligated to act in your best interests.