Retirement Planning

A Plan that Pays

Conventional wisdom tells us to subscribe to the buy-and-hold mantra of investing, and that investors should take risks in search of big gains while they are young. Bill DeShurko, managing member of 401 Advisor, LLC, disagrees.

“The industry paradigm is that, when you are young, you should be able to take on more risk,” DeShurko said. “I think [today’s] young people get it that risk does not equal reward in investing.”
DeShurko explained how high risk investments can actually create greater losses for a young investor. Someone who loses $10,000 at age 60, only loses his investment, but a 30-year-old who risks the same $10,000 stands to lose the compounding interest on that investment as well, which could mean a net loss in the neighborhood of $350,000 by the time retirement rolls around.

“The reality is that lower risk investing in stocks outperforms higher risk investing. For young people, stay away from risky investment,” he advised.

Instead of gambling capital on buy-and-hold or high-risk portfolios in search of fast yields, investing in quality, dividend-paying companies is the key to long-term success. “The mistake people make is that they don’t buy quality,” DeShurko said.

“I believe very strongly that the only way to invest in retirement is to buy high quality companies that not only pay dividends, but have a history of raising dividends,” DeShurko noted. “If you only live off your dividends, you are never going to go broke. Not only will you not go broke, but you are going to leave a heck of a legacy to your children.”

Companies with a strong dividend track record are smarter investments, even during times of volatility. “Companies don’t pay dividends unless they have free cash flow. If they have free cash flow, they can absorb a lot of diversity,” DeShurko said.

After 28 years in the industry, DeShurko isn't fazed by trends or by market turmoil. “The world is no more volatile or worrisome today than it has ever been.” 

Nor does DeShurko believe in packaged plans, annuities or any products guaranteeing income. “I don’t see any safety in annuities. They are supposedly guaranteed, but they are only as safe as the issuing company,” he said.

“I would never lock in somebody to an immediate fixed annuity today, because you are locking in somebody to 30-some years of payments at essentially a zero interest rate. If we get back up to 9 percent interest rates then maybe annuities will look more attractive.”

DeShurko is an avid proponent of roboadvisor technology, saying that investors of all ages – not just millennials – are becoming more familiar with getting information online. 401 Advisor is currently developing its own roboadvisor site,, scheduled to launch in 2016.

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