How retirees can avoid losing their nest egg

By Polycarp Njoge

Many retirees are concerned about whether they will outlive their savings and lead a decent life in their sunset years.

And in seeking ways to ensure they are comfortable, they look for savings and investment options that produce earnings that are sufficient to cover their living expenses.

To avoid losing the retirement nest egg, retirees are often tempted to put their savings into investments that produce guaranteed rates of return. While these investments usually guarantee the principal and earnings, the rate of return are usually relatively low when compared with other investments.

To get good deals, retirees may meet financial services sales personnel, who are interested in meeting their sales goals than matching clients with suitable products.

As a result, investors are often locked in unsuitable investments and don’t realise it until it is too late. For example, suppose a retiree is persuaded to purchase a variable annuity investment because it includes payout option that provides guaranteed income for as long as one is alive.

Easy withdraw

But the investment may not be suitable in some cases because, in the event that the retiree needs to liquidate the annuity or make early withdrawals, the withdrawal charges and the penalties may be exorbitant.

While everyone is at risk for fraud, retirees often face greater risk. Many fraudsters who prey on senior citizens portray themselves as licensed investment professionals. However, in many cases, they are unlicensed.

In some cases, retirees have invested in pyramid schemes and have been defrauded by individuals they believed they could trust.

To avoid such eventualities, retirees need to:

• Conduct thorough research into the investment product in which they are interested in and compare it with other investments.

• Work with a competent financial planner to design a portfolio that is balanced and risk-appropriate. Most financial professionals recommend investing more conservatively during retirement.

• Avoid investments that seem too good to be true. Retirees should check the background of an investment professional before agreeing to have that person manage investments. One resource is the Capital Markets Authority, which hosts an investor protection and education department dedicated to informing investors on how to protect their investments.