Retirees Boost Their Financial Risk With Gold

A shortage of retirement income is one of the biggest predicaments facing Baby Boomers. The Center for Retirement Research at Boston College pegs it as a $6.6 trillion conundrum. The Center's analysis included major sources of retirement income like Social Security, traditional pension plans, personal savings, and 401(k) retirement plans.

What have investors been doing to fix this? Instead of tackling this $6.6 trillion problem head-on, too many retirees have been making the fundamental mistake of concentrating their investments in gold – an asset that produces zero income.

Observant financial advisors should be quick to point out this predicament to retirees who have converted to the goldbug religion. If generating income is their primary financial goal, why are they overleveraged in non-income producing assets like gold?

The Federal Reserve Bank's distorted monetary policies over the past several years have had a perverse effect upon the investing public. Sadly, it has induced many investors to take more risk with their capital than they know.

Although gold is often sold as a "safe haven" trade, that argument begins to vanish when gold prices sink.

The fact is any substantial decrease in gold prices will undoubtedly massacre these unsuspecting folks. And while they wait for gold prices to recover, they'll get nothing in exchange for waiting. At least S&P 500 investors got dividends during the "lost decade!"

For anyone that doesn't think a decline in gold prices is problematic, tell that to the people who bought gold at $834 per ounce in 1980 and sat on dead money over the next 27 years.

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Ron DeLegge is the Editor of ETFguide.com and Author of "Gents with No Cents: A Closer Look at Wall Street, its Customers, Financial Regulators and the Media." (Half Full Publishing Group, 2011)