Missed Fortune Super Blog

A Savings Vehicle That Makes All the Difference

Missed Fortune – Will You Have Enough to Retire?

Posted on | September 26, 2010

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Savings Dangers & Blunders

According to a new study, Americans are $6.6 trillion short of what they need to retire. Declining stock and housing values have squeezed savings.

Boston College’s Center for Retirement Research said they reached that $6.6 trillion figure using “conservative assumptions,” such as a 3 percent return rate on assets or no further cuts in pension coverage. That’s just not realistic.

Say you bought and held a random assortment of stocks and mutual funds from 1990 to 2001. You could have made, on average, 12.9 percent.

But how much did the average American earn during the most aggressive upswing in market history? 2.9 percent.

Most Americans buy and sell at the wrong times. One of the biggest blunders they make is using short-term investments for long-range goals. They put their money in accounts yielding 1 to 3 percent interest only to be ravaged by inflation and taxes down the road.

Most Americans lost 30 to 40 percent of the value of their IRAs and 401ks in 2008 and still haven’t recouped their losses. It doesn’t have to be this way.

Make Your Savings Earn More

There are people using indexing strategies who didn’t lose a dime in 2008 and locked in gains of 16 percent in 2009.

Most people using Missed Fortune strategies are up 50 percent from where they were four or five years ago. That’s without adding more money themselves — and it’s tax free.

When you save for the future, consider what that future may look like. Most people will not be in a lower tax bracket when they retire. Taxes will go up and inflation is coming.

If you try to bulk up your retirement funds, don’t choose a vehicle that will be taxed to the max later. You could outlive your savings.

Consider that, at 5 percent inflation, the cost of living doubles every 15 years. If your nest egg generates $6,000 a month in income, it will only buy $3,000 worth of goods and services 15 years from now. In 30 years, it’s down to $1,500.

You don’t have to lose sleep while our elected leaders quarrel over the Bush tax cuts. You can rest easy using sound strategies such as indexing and maximum-funded insurance contracts.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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