So, you have a retirement plan at work.

Great. Now what?

You are supposed to pick your investments.

Mmmmkay. How?

Maybe your Plan Provider uses a service to guide you, or maybe they don’t.

Maybe your employer gave you a brochure with all the options in it and you just pick one with the “best” performance. (Whatever you think that is…)

Maybe you found an online questionnaire that directs you into a single fund that is matched to the year you expect to retire and is “managed” to adjust along the way.

Maybe you filled out a 7-question form about risk tolerance and it recommended a lifestyle fund like “conservative” or “moderately aggressive” or “insane thrill-seeker”. (Probably didn’t actually list that one.)

One question:

On the day you retire, are you going to be happy with the lifestyle you can afford from the amount of money you have accumulated?

How can you know?

Have you been given ANY concrete evidence to support any particular investment recommendation for you?

Pause that question for a moment and consider this:

Since mutual funds are the primary vehicle of choice in retirement plans, it pays to look at what mutual funds are doing for investors.

(It’s actually not very good.)

The Investment Company Institute reported 20-year data from 1993-2012 for stock fund investors, bond/fixed income fund investors, and compared them versus the S&P 500 (US Stock index) and the Barclay’s Aggregate Bond Index.

Here’s how the returns compare…

 

 

Now, I don’t know about you, but if I were to project 20 years out and expect my investments to act like stock and bond indexes, and support my retirement based on those projections, then this data tells me I will be SORELY mistaken.

Imagine you are a “Moderate” investor with an allocation of funds that equals 60% to stocks and 40% to bonds. If your expected returns after 20 years were to equal 60% weighting to the S&P 500 Index and 40% weighting to the Barclays Aggregate Bond Index, then here’s what you would be expecting:

S&P 500 return: 8.21%     My allocation: 60%            Expected Weighted return: 4.926%

Barclays return: 6.34%     My allocation: 40%            Expected Weighted return: 2.536%

My combined expected return: 7.462%

 

Equity fund return: 4.25%           My allocation: 60%            Actual Weighted return: 2.55%

Fixed Income return: 0.98%        My allocation: 40%            Actual Weighted return: 0.392%

My combined ACTUAL return: 2.942%

There’s a HUGE difference between 2.942% and 7.462%. (A HUGE MISS, actually!)

So, back to our question we paused on above, “Have you been given ANY concrete evidence to support any particular investment recommendation for you?”

If the long-term projection you’ve been given has been based on the long-term average of an index and NOT the performance of the funds RELATIVE to those indexes, then you shouldn’t feel very confident about the “concrete” these people are asking you to build your future on.

So…. What else is there?

How else can anyone know which Plan options to invest in?

Are we supposed to hope that our smart co-worker’s investments are the right ones and roll the dice on that?

No. Here’s a better idea.

Why not use a Report Card for the investment options in your plan? Then, choose the ones with the highest grades?

Sound simple enough?

If I gave you a report card with only 5 questions that would allow you to rank your investments, get the exact help you need, and works with any plan, your future would become 95% certain.

You can get it right here.

Ask these five questions to your retirement plan provider about the investments available to you in your plan, and I’m sure you’ll end up with the best options for your particular situation.

The reason it works is because each question is specifically worded to cut through the *ahem* “stuff” that doesn’t matter, and gets righ to the heart of the matter.

This works for young and old, risky or cautious, big accounts or small.

So, use the Report Card. Then, when you are asked,

On the day you retire, are you going to be happy with the lifestyle you can afford from the amount of money you have accumulated?

You’ll scream out a big fat YOUBETCHA!!!