Retirement Blunders by the Pros

Featuring

• 

  Even Experts Can Get It Wrong

  
  
  We all make mistakes. But when they involve retirement, serious mistakes can mean working till you drop instead of retiring in style. Invest too conservatively? You could fall short of cash in retirement. Too aggressively? A market downturn could wipe out your savings.
  
  And here's a sobering thought: Even financial professionals -- people who are paid for the wisdom of their judgments -- commit financial blunders they live to regret. USA TODAY asked several experts to reveal their most regrettable financial decisions.** Some of their errors led to huge losses.
  
  Still, their experiences show that most financial mistakes aren't fatal to your retirement, as long as you learn from them. One common refrain: Start investing, carefully, as early in life as possible. And keep it up.
  
  
  
  

  Next: See Professional Blunders

  
  
  
  **These profiles have been abridged.

• no photo

  Mark Zandi

  Chief economist at Moody's Economy.com
  
  Biggest mistake: Letting savings languish
  Zandi says he treated his investments with "extreme benign neglect" throughout his 20s and 30s. "I think I saved reasonably well, but I spent no time or thought on how to invest those savings," he says. "So, consequently, my savings ended up in low-yielding cash instruments.
  
  "I was barely keeping pace with inflation, which I think is a very significant mistake because of the power of compounding," Zandi says. "I gave up a lot of potential return in the '90s. But I was taking a lot of risks in other aspects of my life, because I was starting a business. All my energy and waking hours were focused on that.
  
  What he would have done differently: "I should have put my money on autopilot and automatically transferred money from my checking account into a plain-vanilla stock index fund," Zandi says. "I would have gotten some diversity, but I wouldn't have had to spend a lot of time on it."
  
  "It's just a matter of commitment and discipline and spending the time. The way I think about it now is: Managing your personal finances is a daily affair. It's like brushing your teeth."
  
  

  Next From: Founder of Garrett Planning Network

• no photo

  Sheryl Garrett

  Founder of Garrett Planning Network
  
  Biggest mistake: Investing in timeshares
  Garrett bought her first Florida timeshare in the early 1990s, while vacationing in Orlando. At the time, she was 26 and didn't have much of a nest egg. She attended the timeshare company's 90-minute presentation for the freebies -- breakfast, $50 in cash and tickets to Universal Studios -- convinced she could resist the sales pitch. But once she got there, she says, "All the language the salespeople used to sell a timeshare worked perfectly on me." Two years later, she attended another seminar and ended up buying a second Florida timeshare.
  
  She spends more than $1,000 a year on taxes and maintenance fees for her timeshares. Exchanging them for another location costs an additional $300. When Garrett tried to sell her timeshares, she learned another tough lesson: Timeshares are lousy investments. On the secondary market, she says, buyers can buy timeshares for a fraction of their original value.
  
  What she would have done differently: She would have skipped the free breakfast. "The only way you can truly protect yourself from this kind of a pitch is to not allow the pitch to ever occur," Garrett says. "I don't put myself in a situation where somebody is going to make a sales pitch to me unless it's something I already want to own."
  
  

  Next From: Co-founder and CEO of The Motley Fool

• no photo

  Tom Gardner

  Co-founder and CEO of The Motley Fool,
  
  Biggest mistake: Selling too soon
  Gardner bought Dell stock in 1995 at about $35 a share. By the next year, it had soared about 25 percent. "That was a wonderful return. I thought, 'It's great!' So I sold. I remember saying, 'I will get back into this great company when it gets back to my price.'" He never did, and the company's stock has since grown 40 times in value.
  
  What he would have done differently: "I should have thought of myself as an investor in a business, not an investor in a stock," Gardner says.
  
  That means looking for companies that command powerful market positions and executives with big personal stakes in the company. It's even better if the CEO/founder has his name on the company, he says, such as Michael Dell of Dell.
  
  Don't look just at short-term earnings and stock prices, Gardner says. "If you can find a situation where the CEO owns a large stake in the business, where he's demonstrated a passion for the business and there is great market opportunity, then that's one where you just close your eyes and hold on for 10 years. Like Oracle or Microsoft or Dell or Amazon.com or eBay or Yahoo. Even though Yahoo has had troubles, it's still gone up 30 times in value since it went public."
  
  

  Next From: Managing Director at Lehman Bros.

• no photo

  Robert Willens

  Managing director, tax and accounting expert at Lehman Bros.
  
  Biggest mistake: Waiting too long to sell
  "The investment (my wife and I) made in a company called USA Classic seemed, at the time, a can't-miss proposition," Willens says, "but turned out be the worst investment we ever made.
  
  "The apparel they were offering seemed very attractive. Their style seemed to be unique. We were comforted by the fact that they had a company that owned a substantial amount of their stock ... that would be in the position to support it and weather any storms that might arise. We also were impressed with their management."
  
  After the company's initial public offering in the early '90s, "It ran into some operational problems," Willens says. ... USA Classic filed for bankruptcy protection in 1994, two years after its IPO.
  
  What he would have done differently: "I would never average down with a small company like this again. The fact that you may have identified what might be, under better circumstances, a great company is nothing" if it doesn't have a cushion of capital to weather downturns.
  
  "We've never forgotten this experience," he adds. "It's made us more conservative (investors). In a way, I'm glad it happened because it changed our thinking about investing."
  
  

  Next From: CEO of Coldwell Banker

• no photo

  Jim Gillespie

  CEO of Coldwell Banker
  
  Biggest mistake: Began saving too late
  "When I was 22, I was not thinking that I'd ever be 62 and looking at retirement," says Gillespie, 62. By the time he started his career in real estate at age 30, he had nothing saved.
  
  Of course, he's since made up for lost time. For several years, he and his wife, Jenny, bought a rental house each year. They now own nine rental houses, two apartment buildings and a small office building. "The rents on the properties are like dividends on stocks," Gillespie says, "and we've seen what appreciation has done."
  
  What's more, they get to deduct the depreciation of the residential buildings on their taxes over 27½ years, according to the IRS tax rules.
  
  What he would have done differently: "I would have listened to my employers and opened an IRA or whatever the savings vehicles were then. I think that was before 401(k)s. I did not pay attention then.
  
  "Crazy, but this is still a problem with most young citizens," he says.
  
  

  Next From: Manager of FPA Capital and FPA New Income funds

• no photo

  Robert Rodriguez

  Manager of FPA Capital and FPA New Income funds
  
  Biggest mistake: Overconfidence
  Rodriguez would pass anyone's definition of a cautious investor. FPA New Income, a bond mutual fund, hasn't suffered a losing 12-month period since Rodriguez began managing it in 1984. FPA Capital, a stock fund, has outperformed the Standard & Poor's 500-stock index by an average of 6.36 percentage points a year over the past 15 years.
  
  Rodriguez, a value investor, looks for beaten-up stocks and waits for them to return to Wall Street's favor. Usually, that works. But sometimes, a fallen company is just a bad investment.
  
  In June 2000, Rodriguez had a big bet on Conseco, an insurer whose stock had fallen on hard times. After Conseco bought Green Tree Financial, which made subprime loans on mobile homes, its stock tumbled from $20 in May 2001 to $4.40 in June 2002.
  
  What he would have done differently: "Always be suspicious," Rodriguez says. "Don't think you know more than you really do. We have become much more circumspect about the ratings companies and about structured finance."
  
  It was an invaluable lesson, he says. FPA avoided the problems of bonds backed by subprime mortgages that have plagued the credit markets this year.
  
  

  Read the Full Article: Pros Fess Up

• 

   

  More on Investing:
  
  AOL Mutual Fund Center
  Retirement Advice
  Everything for Your 401k
  Starting an IRA
  How You'll Live in Retirement