5 Investments That Could Sabotage Baby Boomers’ Retirement Dreams

Baby boomers, defined as those born between 1946 and 1964, have lived through just about every market condition you can imagine: the stagflation of the 1970s, the market crash of 1987, the dot-com boom (and the bubble bursting), the housing crisis and recession in 2008 and historically low interest rates for years after.

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With an age range starting at 58, the vast majority of baby boomers are either close to retirement or already have retired.

Investing carries numerous pitfalls regardless of your age. Young investors have decades to recover from mistakes or market fluctuations. For baby boomers, though, it’s critical to avoid investments that could delay your dreams of retirement — or wreck them completely.

Crypto

It almost goes without saying that older investors should stay away from obviously risky assets like cryptocurrency. While it’s fine to have some risk in your portfolio when you’re close to retirement — or even after you’ve retired — highly volatile and highly speculative assets really should be avoided at all costs.

“There is no rational way to determine the value of Bitcoin or any of the other various cryptocurrencies as one can’t apply the tools of traditional finance to arrive at the intrinsic value of the supposed asset,” said Robert Johnson, CFA and professor of finance at Creighton University’s Heider College of Business. “Investing in Bitcoin and other cryptocurrencies is pure, unadulterated speculation.”

See: Baby Boomers Transfer Property to Children To Secure Generational Wealth

Certificates of Deposit

Certificates of deposit have long been considered safe havens for conservative investors. These fixed-income investments offer guaranteed interest rates for specific terms, typically ranging from a few months to several years. It may sound counterintuitive to warn older investors away from a low-risk investment vehicle — the problem is that with low risk comes a low return.

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“CDs may not keep pace with inflation; and, for retirees who can be retired for 20 to 30 years, having all your investments in overly conservative asset classes can ultimately hurt your income later in life as well as your estate legacy,” said T. Eric Reich, CFP and president of Reich Asset Management.

Collectibles

Reich also warns against relying on collectibles. This should sound like great advice for anyone old enough to remember Beanie Babies, but crazes like that happen for a reason. Collecting is fun, and it’s exciting to imagine that your collection might one day make you rich — a narrative that probably also makes it easier to justify the expense.

“Many retirees think that the lifetime accumulation of valuable collectibles will someday help them in retirement,” Reich said. “The reality is that most collections are worth far less than the person paid, let alone enough to supplement retirement.

“There’s nothing wrong with collecting, but don’t bank on securing your future with stamps, coins, art, collectible card games and the like.”

Stocks With High Dividend Yields

Historically, high-yield dividend stocks have been attractive to retirees as a way to supplement their income. Stocks like utilities, real estate investment trusts (REITs) and preferred stock generally offer higher dividend payments than the average yield of the stock market. In an uptrending stock market during a time when interest rates were close to zero, these types of stocks generally did quite well.

Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group, said, “Now that bonds are providing higher yields and living up to their ‘fixed income’ moniker, retirees should examine their asset allocation and look to see if they may be taking too much risk through their equity allocation.”

Investing on Margin

Investing on margin involves borrowing money from your broker to invest in the stock market. This strategy can amplify gains through leverage, but it also significantly increases the risk of losses. If your investments don’t perform as expected, you may end up losing more money than you originally invested.

“Again, when interest rates were low,” Yoshioka said, “it may have made sense to use margin, using your investment account as collateral to get some short-term financing or use the margin loan to help buy more securities. However, with interest rates at current levels, a retiree may be subject to much more significant losses than initially anticipated.”

So What Should Baby Boomers Invest In?

There’s no silver bullet answer to this question, for baby boomers or any other generation. There are, however, a couple of general pieces of advice that should be of use to anyone.

The first is to diversify your portfolio. It’s fine to invest in CDs, bonds, annuities, even stocks, as long as you don’t concentrate too much of your portfolio in any one asset class or investment.

Second, think about consulting a financial advisor, ideally one that specializes in retirement planning. A professional can help you create a customized strategy that aligns with your financial goals and risk tolerance. Look for a respected credential like “certified financial planner.”

If you’ve made it close to retirement, avoiding mistakes is more important than anything else. Making good choices will ensure that your retirement dreams will one day come true.

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This article originally appeared on GOBankingRates.com: 5 Investments That Could Sabotage Baby Boomers’ Retirement Dreams