Home|About Us|Our Services|News|Resources|Disclosures|Client Login|Contact Us

Performance Anxiety: A Leading Cause Of Investor Dysfunction After Age 55

Are you nearing retirement and worried about your portfolio's performance? Do you fear outliving your money?

Investment performance anxiety is often hard to talk about for a pre-retiree and can lead to investor dysfunction. This revealing illustration vividly shows that retirement success is about the size of your savings rate when you're in your 50s and 60s!

Although your portfolio performance is more important in your 20s and 30s, your savings rate matters more to retirement success as your retirement nears.

A 25-year-old with a $35,000 income that rises annually by 3%, who saves 6% of their income in a tax-deferred retirement plan and averages a 6% portfolio return annually, would accumulate $528,007 at age 65. If the 25-year-old boosts their savings rate to 10%, the retirement account would grow to $880,012 at age 65.

If the 25-year-old with the same income annually saves at the same 6% rate, but earns 10% annually, the account at age 65 would be worth $1,392,758.

Clearly, the extra 4% portfolio return annually boosts the retirement portfolio more for the 25-year-old than boosting the savings rate by 4%.

But look what happens when a 55-year-old is faced with the same dynamic.

A 55-year-old — earning $84,954 today after 3% raises annually since age 25 — who continues to get 3% raises annually, saves at the 6% rate, and earns a 6% portfolio return annually, would have $87,344 in their retirement account at age 65. Boosting their portfolio return annually to 10% would grow the account to $106,961 at age 65. In contrast, boosting the 55-year-old's savings rate to 10% puts the portfolio value at $145,573 at age 65 — a much better result.

While pre-retirees often grow anxious about portfolio performance, it's their savings rate that is more influential as retirement nears. Portfolio returns are subject to investment risks, which you do not control. Your savings rate, in contrast, is something you do control. Rather than suffering from investment performance anxiety, it's wise for pre-retirees worried about outliving their money to examine their ability to boost their savings rate.

This article was written by a veteran financial journalist. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation. Tax laws are subject to change. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. No one can predict the future of the stock market or any investment, and past performance is never a guarantee of your future results.

Email this article to a friend

This article was written by a professional financial journalist for Neiman & Associates Financial Services, LLC and is not intended as legal or investment advice.

©2020 Advisor Products Inc. All Rights Reserved.
Printer Friendly Version
Business Owner Alert: Main Street Lending Program Offers Covid Aid
Financial And Tax Planning For The Long Run
A Constellation Of Facts Squarely Aligns With 2020 Roth IRA Conversions
Covid-19 Tax Break Suspends Required Minimum Distributions
PPP Update For Business Owners
Business Owner Alert: Covid-19 Retirement Loans
Coronavirus Tax-Breaks For Individuals; Details Emerge From IRS
Coronavirus Tax Planning Alert
Amid The Awful News, Some Good Signs
How Negative Interest Rates In Germany Limit Pandemic Economic Damage To U.S.
The Current Economy And Outlook For May And June
To Fight The Financial Crisis Spawned By The Coronavirus, The Fed Is Utilizing Powerful New Tools
Financial Planning For The Long Run Amid The COVID-19 Epidemic
Business Owners: Paycheck Protection Program Update
Business Owner Alert: Paycheck Protection Program
Amid The Coronavirus Crisis, Nine Tax And Investment Tips
© 2020 Neiman & Associates Financial Services, LLC | 22 Mill Street, Suite 303, Arlington, MA 02476 | All rights reserved
P: 781-641-5700 | F: 617-812-2594 info@neimanonline.com |
Disclosure | Contact Us