A Retirement Tip: The Effect on Your Investments from Returns and Timing


incredible retirement tip

Here is an example that proves how the same return each year—with different timing—has a dramatic impact on the size of your portfolio.

Harry is age 54 and has $800,000 in his portfolio. He saves $16,000 each year. He plans on retiring in ten years and wants to have $100,000 available to him each year once he’s retired.

His portfolio is split 60/40 between stocks and bonds. Assuming a return of 8.43%, his estate will be worth $3.1 million when he reaches age 92.

This sounds good until you consider the following:

Market Reality:

  • Real market at 8.5% (1954-1994): Broke at 87!
  • Real market at 9.8% (1960-1998): Broke at 90!
  • Real market at 7.5% (1940-1978): $2.5 Million Estate

Would Harry prefer the higher return of 9.8% and run out of money or would he prefer the 7.5% return that would leave $2.5 million in his portfolio?

Since you cannot control the timing of either the market or your returns, you have to have an overall strategy to make the most of your incredible retirement.

You cannot count on guaranteed investment returns over an extended period of time. Also, you can’t assume that the highest average return is always the best.

See how our investment system actually performs and what we are telling our clients about the financial markets in our Quarterly Market Review. Request your copy today.

About Brian Fricke, CFP®
Brian L. Fricke is a Fee Only® Financial Planner, Author, Speaker and Incredible Retirement® Expert.