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Saving For Retirement Beyond The 401(k)
Which is more important: the performance of your investments during your saving years, or how much you paid in fees? Or does it ultimately come down to how much money is yours to spend once you retire?
One in three Americans has zero dollars saved for retirement. More shocking, 28% of those over 55 have no retirement savings.
Investing can be scary, and fear causes most people to take the path of least resistance, generally meaning we do little or nothing. Even among those who are saving for retirement, there’s not much agreement. Is it better to go it alone – for example, buying index funds for a tax-deferred IRA – or pay a financial advisor for a more intricate plan?
So, are advisors worth it in the end? For some, the value of an advisor should come from a long-term perspective and the ability to guide clients through a holistic plan, avoiding irrational (and often emotional) pitfalls. Investment expenses and commissions are under scrutiny. The proposed – now postponed – Department of Labor fiduciary rule, requiring advisors to act in the best interest of the investor, has put a spotlight on the topic.
Consider, for example, the 2008 market plummet. What was your first reaction? It’s human nature to want to pull out or move to cash when savings are dwindling away.
Unfortunately, trying to time the market can be catastrophic to returns. Six of the best 10 days in the S&P 500’s last 20 years occurred within two weeks of the 10 worst days. Missing those 10 days would have taken your return from 7.68% down to 4%, according to J.P. Morgan Asset Management data.
Investors panicked in the first quarter of 2016 as they watched the S&P 500 drop more than 10%. Yet it ended up nearly 10% for the year. Despite average intra-year drops of 14.2%, annual S&P 500 returns are positive…