It Planning for retirement can be a daunting task. We suggest that the starting point for everyone should be an analysis of the income level that your current retirement assets can support. If you find that you are short of your goal, the only that you can do to directly affect your retirement is to save more today. Joe doesn t have to save anything between now and retirement to meet his goals, and anything from Social Security is gravy. This is again true, of course, if Joe earns 8.8 percent on the money in his retirement plan, lives to exactly age 99 and sees the cost of living increase by three percent each year.
Investments do have a history of providing disappointment as well as joy.
If stocks returned exactly 8.8 percent every year, the Dow Jones Industrial Average wouldn t have taken 17 years to climb from 900 to 1000. And dollars invested in the Japanese stock market in 1989 wouldn t be worth less than half that amount today. Joe may be worried about missing out on spectacular stock market returns in the immediate future, but this is the wrong thing to fear. A more important objective should be to protect his assets and reduce the risk that he ll fall short of his retirement needs. It s all right to earn lower investment returns than his friends, as long as he s currently ahead of the pace as far as saving for retirement is concerned.