Obstacles to retirement: 7 actions to avoid as you approach the finish line

As you approach retirement, it's essential to carefully review your investment portfolio and make strategic decisions to protect your financial future. Although some stocks may seem attractive, some investments can pose significant risks to your retirement savings.

In this article, we'll explore seven actions that retirees and those close to retirement should avoid. These stocks are characterized by factors such as high volatility, unsustainable business models, or unfavorable market conditions that could put your hard-earned nest egg at risk.

Dividend-paying stocks, often sought after by retirees for their potential to generate passive income, will be the focus of discussion. However, not all dividend stocks are equal. Some companies may offer attractive returns, but lack the fundamental strength to sustain those payouts over the long term.

So here are seven stocks that future retirees might consider ditching their portfolios as June approaches.

Retirement Stocks to Avoid: Exxon Mobil (XOM)

Exxon Mobile (NYSE:XOM) faces significant challenges due to the transition to renewable energy, oil price volatility and regulatory concerns.

Investors might hold on to outdated market conditions, believing that XOM's past performance will continue. However, the company today faces significant challenges from a renewable energy perspective.

Despite these efforts, ExxonMobil CEO Darren Woods acknowledged the challenges of replacing the current energy system due to its scale and utility. Woods stressed that a rapid transition to renewable energy is not realistic without maintaining investments in oil and gas to ensure energy security and affordability.

In the short term, five Wall Street analysts forecast a 17.49% decline in EPS for fiscal 2027, indicating a substantial decline in revenue. This reflects broader risks within the energy sector and highlights deeper structural issues.

XOM is then no longer a set-it-and-forget-it stock like it once was, and requires careful monitoring moving forward.

CVS Health (CVS)

CVS Health (NYSE:CVS) is facing widespread theft and declining profit margins. Despite efforts to mitigate theft, these problems have led to store closures and financial instability.

In the first quarter of 2024, CVS reported total revenue of $88.4 billion, an increase of 3.7% from the previous year. However, the company's GAAP diluted EPS fell to 88 cents from $1.65 in the first quarter of 2023, and adjusted EPS fell to $1.31 from $2.20.

Additionally, CVS had to revise its full-year 2024 guidance, lowering its GAAP diluted EPS to at least $5.64 from $7.06 and its adjusted EPS to at least $7 from $8.30.

In addition to combating theft, CVS Health is implementing cost-cutting measures to stabilize its finances. The company aims to cut spending by $800 million by 2024, including cutting 5,000 jobs.

CVS, like XOM, is a shadow of its former self and retirees should avoid it.

Retirement Stocks to Avoid: Pfizer (PFE)

Pfizer (NYSE:PFE) has seen its stock decline 25.83% over the past year, primarily due to reduced pandemic-related revenue and investor concerns about replacing that revenue and upcoming patent breaches.

Additionally, Pfizer's revenue from COVID-19 products like vaccines and Paxlovid declined significantly, contributing to a $9 billion reduction in revenue estimates. This drop follows the previous pandemic boom which saw the company's shares peak at $59 in December 2021.

Pfizer's debt increased significantly, in part due to the Seagen acquisition. Pfizer financed the $43 billion acquisition largely with $31 billion in new long-term debt, with the balance coming from short-term financing and existing cash. This makes it a much riskier option than before, although the acquisition has some accretive value for investors.

Retirement is not the time when investors should consider buying shares of highly leveraged companies, and PFE checks that box with its acquisition of Seagen.

AT&T (T)

AT&T (NYSE:T) is struggling with high debt and competitive pressures in the telecommunications sector. The company's significant investments in 5G and media acquisitions have yet to generate expected returns, and its high dividend payout ratio is raising concerns.

For 2024, AT&T plans to continue its focus on expanding its 5G network and fiber broadband services. The company plans capital expenditures in the range of $24 billion, prioritizing 5G and fiber expansion to drive future revenue growth. The EPS growth outlook is around 4.9%.

As of last quarter, the company's net debt was about $135 billion. This high level of debt limits its financial flexibility. It finds itself in something of a double bind: It must continue to grow to improve stock prices or increase dividends, but to do so it requires huge capital expenditures, perhaps only by taking on more debt. more or by diluting existing shareholders.

I don't see a positive path forward for AT&T despite its stability.

Retirement Stocks to Avoid: Boeing (BA)

Boeing (NYSE:B.A.) continues to recover from the 737 Max crisis and ongoing PR disasters due to leaks and whistleblowers.

The company is heavily leveraged and faces ongoing production challenges and regulatory scrutiny. For retirees, the high risk associated with Boeing stocks, combined with their volatility, makes them a less than ideal investment in a retirement portfolio.

In 2024, two former Boeing employees, John Barnett and Joshua Dean, who had raised safety concerns, were found dead in tragic circumstances

The company has also been the subject of 32 complaints to the workplace safety regulator over the past three years, highlighting ongoing safety and quality issues. These complaints led to further investigations.

This resulted in BA's stock market value losing 31.38% year to date. Furthermore, no analysis can predict when the media circus will end for BA, nor what the results of these investigations will be.

BA could eventually recover, and I think those who can weather the storm could ultimately benefit from keeping it going, but retirees don't have the luxury of time on their side and should tread carefully.

Tesla (TSLA)

You're here (NASDAQ:TSLA) comes with high volatility and significant risk. The stock has seen dramatic price swings and is heavily influenced by market sentiment.

Tesla faces increasing competition from other electric vehicle (EV) makers, particularly in key markets like China. Companies such as BYD (OTCMKTS:BYDDF) And NIO (NYSE:NIO) are rapidly increasing their market share, offering comparable electric vehicles at competitive prices. This increased competition puts additional pressure on Tesla to continue lowering prices.

Biden's tariffs on Chinese electric vehicles may go a long way to softening the impact on the U.S. market, but Asia appears to be the main growth market, and that's where these cheaper but still luxurious and modern ones began to invade the streets and highways.

Additionally, despite strong demand for its vehicles, Tesla has encountered production and delivery bottlenecks, partly due to logistical problems at its Shanghai factory. These disruptions have affected its ability to meet its delivery targets, with the company forecasting deliveries of 1.8 million vehicles in 2024, below analysts' expectations of 1.9 million.

TSLA is a good stock, but risky. Retirees should reconsider their holdings if they want to reduce volatility.

Altria (MO)

Last on the list of retirement stocks to avoid is Altria (NYSE:MO). The company faces long-term declines in smoking rates, regulatory pressures and legal challenges. Although the company offers a high dividend yield, it relies heavily on tobacco sales, a sector that is increasingly scrutinized and facing declining demand.

The company's domestic cigarette shipment volume decreased 10% in the first quarter of 2024. The decline is due to macroeconomic pressures on consumers' disposable income and increased competition from illicit vaping products.

Additionally, the company also experienced setbacks in diversifying this revenue stream, such as the loss on the disposal of its JUUL equity securities, which resulted in a pre-tax non-cash loss of $250 million.

I think MO is one of the biggest dividend traps for retirees, thanks in part to its 8.63% dividend yield. This has been accompanied by capital erosion and stagnation over the past five years, and a monumental turnaround seems unlikely over the years without solid progress in diversification being seen.

As of the date of publication, Matthew Farley did not hold (either directly or indirectly) any positions in any securities mentioned in this article. The opinions expressed are those of the author, subject to InvestorPlace.com's publishing guidelines.