Your Guide to American Retirement, Boomer Style

The good news is that there are more retirement assets in the United States than ever in our nation’s history – more than $29 trillion. But some of us may have savings gaps in our nest egg. If so, we will be working much longer. But our extended work life can be more productive and creative if we heed some lessons.

A soon-to-be retiree will need to be disciplined, confident, and well-informed in the volatile times ahead. Our independent nature will come in handy because more than ever we will be steering our own future into retirement. Fewer of us have corporate pension funds so we will be dependent on saving and investment in our 401(k) and IRA tax-advantaged retirement plans.

Only 13 percent of private sector workers have defined benefit pensions today and in this competitive global environment it is unlikely pension plans will ever return.

According to the Bureau of Labor Statistics (BLS), pension coverage is much higher in the public sector reaching 78 percent of employees. That is why policies that encourage more 401(k) savings plans for small medium-sized businesses and Health Savings Accounts are critical for a better funded future.

We have a strong economy, however, the global bond market continues to generate the lowest interest rates in years. Bond yields will not be able to provide the necessary income enjoyed in the past. And rates could fall further if a recession appears on the horizon.

We should be prepared for volatility, market and political risk so now is a good time to stay grounded with a few simple, time honored metrics. There are no guarantees but this data may prove reassuring to a long term retirement investor when the market gets bumpy. Below are a list of historical facts — not investment advice — but familiar stats to all professionals.

  • Market corrections happen every single year. Market swings normally average about 10 percent up or down — and in dramatic examples can exceed 20 percent. Do not panic.

  • The market rarely experiences negative returns two years in a row.

  • Stock prices have moved higher far more than they’ve gone lower. In fact, over the last 90 years, in any 15-year period, stocks have posted positive returns 99.8 percent of the time.

  • Patience in the long term has an incredibly high probability of reward.

  • Advice for the young investor—START NOW! Long term returns for equities average 8 percent to 10 percent. Imagine being able to put into an IRA $2,000 a year from age 19 to 26 years old. Then not investing another dollar for the next 38 years until “retirement” age. At a 10 percent return, this would compound into nearly $1.04 million at the end of that time!

Slow and steady wins the race. ~Aesop