As the bull market that began in March, 2009 picks up steam, the Wall Street stock jocks are urging individual investors to jump back into the market with both feet. They boast that the S&P 500 has hit a 5-year high and is closing in on a new all-time high. But – somehow – they all forget to mention one pretty important fact: It also ended the year 3% lower than where it was 13 years ago at the end of 1999.
This chart tells the rest of the story you’re not hearing…
Some readers may be wondering why I didn’t include the value of the dividends earned by the S&P 500 companies in the chart. So let’s do that now. The total return of the S&P 500 (including dividends) for the past 13 years was 22%, which is an average return of about 1.7% per year – and still lags inflation.
Don’t forget the fees and taxes…
To make matters worse, those returns assume no fees or commissions were paid. But if you bought a mutual fund that tracks the S&P 500 index, you’ll pay fees. And if you’re saving in a 401(k) or other government-sponsored retirement account, those fees are just the beginning.
Did you know that total fees of only 1 percent can slash the value of your savings by 28% over the long-term, according to the Department of Labor?
Then there’s taxes, which can take the biggest toll of all. If you’re saving in a 401(k), 403(b), IRA or similar plan, you’ve only postponed paying your taxes. And most people think the tax rates will only continue to go up.
How confident are you that another market crash won’t occur in 5 or 10 years… or even tomorrow?
I’ve pointed out before that the stock market has experienced several periods where it’s taken 16-25 years just to get back to even after a market crash. And history has a way of repeating itself.
We’ve now had 13 years of a go-nowhere market. How can you be sure that’s behind us now? Unless you have a crystal ball, you can’t, of course. Only history will tell.
But here are some red flags that ought to be making you nervous…
- The economy actually shrank last quarter
- Consumer confidence is down
- Only a few bull markets in history have posted a larger percentage gain than the current one – usually the higher and faster the rise, the deeper the crash that inevitably follows
- Washington continues its war on your retirement by not dealing with unsustainable debt and spending, once again kicking the can down the road
67% of workers say they’re behind schedule in saving for retirement
That’s according to a recent study by the Employee Benefit Research Institute. And 61% of people in their 50s say they’ll need to “significantly” cut back on spending to save for retirement. They did what they were told to do and all they have to show for it is sleepless nights and broken retirement dreams.
Instead of achieving the financial peace of mind they want and deserve, they’ve been digging themselves into a financial hole so deep they may never be able to retire.
And that’s a shame. Everyone deserves to have a secure and predictable income in retirement.
The question is… will continuing to do the same things get you there?
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