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By Christine Benz | 06-28-2010 12:02 PM

Overcoming Retirement Pitfalls

Investor Solutions' founder Frank Armstrong discusses solutions to undersaving, too much focus on current income, and too little attention to inflation.

Christine Benz: Hi. I'm Christine Benz for Morningstar. When you are investing for your retirement, avoiding the big landmines is more than half the battle.

Here to talk about some of the big pitfalls in retirement planning is Frank Armstrong. Frank is the President and Founder of Investor Solutions LLC, a registered investment advisor based in Florida.

Frank, thanks for joining me.

Frank Armstrong: My pleasure, Christine, always.

Benz: So let's talk about some of the big traps that you think investors often fall into when they are planning for their own retirements?

Armstrong: Well, first is they arrive at retirement with far too few funds. They've underinvested, they've saved too little, and they may have been too conservative or they may have blown some money somewhere along the way thinking that they could make it up. You just don't have time to make it up. You need to have a consistent, disciplined process from beginning to end in order for this to turn out well in the vast majority of cases.

Benz: So what's a strategy for someone like that who is getting close to retirement and who has under-saved? What levers can they pull to get themselves back on track?

Armstrong: Well, maybe one of the most helpful is to take a look at where you are, and if you don't have enough capital, then maybe you should defer retirement for just a little while, because, as a practical manner, if you were to defer retirement for five years, you might have 40% or 50% more assets from a combination of higher Social Security, longer time to invest the assets that you have, and additional contributions you can make.

So it can have a big impact on your total retirement income. Then, of course, you know you can downsize, but that's pretty painful for most people.

Benz: So, cut your expenses...

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