Over time, these
seemingly small factors could make a major difference.
Provided by Benjamin Bogetto
Saving
for retirement takes decades and demands the investment of significant amounts
of your income. As this major effort unfolds, you should recognize that some
subtle factors and seemingly minor decisions could end up making a sizable and
positive impact on your financial future.
Your investment yield
may be less important than the amount you save. Beating the S&P 500 feels great,
but outperforming the market is not your foremost goal. Your real retirement
saving objective is to accumulate sufficient assets – enough to provide
adequate income in the “second act” of your life.
How
much control do you have over your investment returns? The short answer is very
little; market cycles, macroeconomic factors, and the behavior of institutional
investors influence them profoundly. On the other hand, you have direct control
over your savings rate. The more you pour into your retirement accounts, the
more dollars you are giving a chance to compound.
As
a hypothetical example, say two people have balances of $100,000 in their
respective retirement accounts. Ariel earns a 10% annual return and puts
$10,000 into the account at the start of every year for 20 years. David gets a
12% annual return from his account, but he never adds to its $100,000 principal
during those 20 years. After 10 years, Ariel’s account balance is $434,638,
while David’s is $310,585. After 20 years, Ariel has $1,302,775, while David
has $964,629. Result: David falls behind, even while achieving a 2% greater
return.1
Investment account fees
can take a toll.
Account fees are little things, but their impact over the years can be enormous
on a retirement saver. This is why you may want to place your invested assets
into accounts with minimal fees, annual fees of well under 1%.
Everyone
talks about the several hundred dollars a year you can save (and invest) by
swapping out your daily, flavored latte for a regular cup of joe, but you might
as well keep ordering lattes. The money lost to lattes pales next to the money
you could potentially lose to account fees. Demos, a public policy think tank,
estimates that high expense ratios and administration fees on investments in a
typical workplace retirement plan may cost a middle-class, dual-income
household as much as $155,000 in retirement assets over a lifetime.2
What you avoid doing may
help your effort as well. Resist
the impulse to deviate from your long-term retirement planning and investing
strategy without careful examination. Be wary of the emotional reactions to
headlines or market disruptions, those little voices urging you to get out of
the market or tilt your portfolio one way or another. Refrain from siphoning
down the money in your retirement accounts and using those dollars for another
purpose. Stick to your plan, ride through the turbulence, and avoid making a
quick, impetuous decision that might do your retirement funds more harm than
good.
On that note, remember
that tuning out the noise is okay. The
financial world is a noisy place, a place of non-stop trading and information
flows. Any notable news development becomes a front page (or home page) item.
It may seem risky to accept so much of this breaking news passively, with no
reaction on your part as an investor or a saver – but passivity has its
virtues. A little passivity – in your temperament, in your investment approach
– may leave your retirement savings in surprisingly good shape over the long
run, compared to the savings of someone who reacts to every temperature shift
in the market climate.
Pay
attention to these little things as you pursue big financial objectives. In
hindsight, you will likely be glad you did.
This material was prepared by MarketingPro, Inc., and does not
necessarily represent the views of the presenting party, nor their affiliates. This
information has been derived from sources believed to be accurate. Please note
- investing involves risk, and past performance is no guarantee of future
results. The publisher is not engaged in rendering legal, accounting or other professional
services. If assistance is needed, the reader is advised to engage the services
of a competent professional. This information should not be construed as
investment, tax or legal advice and may not be relied on for the purpose of
avoiding any Federal tax penalty. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.
Securities offered through First Heartland Capital, Inc. Member FINRA/SIPC
Bogetto Financial is not affiliated with First Heartland Capital, Inc.
Bogetto & Associates does not provide legal or tax advice. These topics are discussed in conjunction with your CPA, Tax Advisor and Attorney.
Citations.
1 - bankrate.com/finance/investing/saving-money-or-investing-more-important-over-time.aspx
[6/25/16]
2 - forbes.com/sites/arielleoshea/2016/08/08/3-common-saving-mistakes-you-can-fix-right-now/
[8/8/16]
Financial Health...For Now & Tomorrow
Contact us Today
Website - www.bogettoandassociates.com
Telephone - 314-858-1602
Email - peter@bogettoandassociates.com
10805 Sunset Office Drive, Ste. 202
St Louis, MO 63127
Website - www.bogettoandassociates.com
Telephone - 314-858-1602
Email - peter@bogettoandassociates.com
10805 Sunset Office Drive, Ste. 202
St Louis, MO 63127
