Many Stock Market Investors Haven’t Kept Up With Inflation Over the Last 20 Years – DALBAR 2019 Report

What kind of return would you have to get in the stock market to make it worth the risk and gut-wrenching ups and downs?

Would you put your life’s savings at risk for a 5% annual return?

Or would you require at least a 7% return?

Or maybe even a 10% annual return?

If you’re like most people we’ve surveyed, you wouldn’t do it unless you thought you could get at least a 7% annual return over time, right?

Here’s the Harsh Reality of the Actual Returns Investors Are Getting…

I hope you’re sitting down because this is going to floor you: According to a new study, the typical investor in equity mutual funds has gotten only a 3.88% annual return… over the last 20 years!

But it’s actually much worse than that. Here’s why…

Have you heard the phrase “nominal return“? That’s the rate of return on an investment without adjusting for inflation.

And inflation for the past 20 years covered by the study averaged 2.17% a year. So let’s do the math:

3.88% average annual return
-2.17% average annual inflation
=1.71% real average annual return

Oops!! A 1.71% real average annual return for the last 20 years?!?

The study did take into account the average fees and expenses you pay in these accounts.

But it did not account for the taxes you’re going to pay if you’ve been saving in a tax-deferred account like a 401(k), 403(b) or IRA. And that’s going to devour at least 25%-33% of your savings, according to the Center for Retirement Research at Boston College.

That assumes tax rates don’t go up over the 20 to 30+ years of your retirement. (If you believe tax rates won’t be going up over the long term, I’ve got a Rolex watch I’ll sell you for $10.)

How did other types of investors fare over the last two decades?

Answer: Even worse than equity mutual fund investors did. Much worse!

The average investor in asset allocation mutual funds (which spread your money among a variety of classes) earned only 1.87% per year over the last two decades, but because inflation averaged 2.17% a year, they actually ended up losing 0.30% every year for 20 years.

But the biggest losers were investors in fixed-income funds. They only managed to eke out a 0.22% average annual return, significantly trailing inflation and digging themselves deeper and deeper into a hole every year.

This shocking data comes from the just-released 2019 Quantitative Analysis of Investor Behavior report by DALBAR, the leading independent, unbiased investment performance rating firm, and it covers the 20-year period ending December 31, 2018.

Once again, the study concluded that…

“The results consistently show that the average investor earns less – in many cases, much less – than mutual fund reports would suggest.”

If you’re scratching your head and thinking, “but I’m sure I did better than that,” the reality is that most investors don’t have a clue what return they’ve really gotten in their retirement accounts over time. The Bank On Yourself Authorized Advisors will have their clients get out all their annual statements and look at the numbers with them. They consistently find that people overestimate their returns by a large margin.

Wouldn’t the Classic Definition of Insanity be to Continue Doing What Clearly Hasn’t Worked for the Last Twenty Years?

If you wouldn’t be willing to put up with the stomach-churning unpredictability of the stock market for a 5% annual return over time, why would you accept a real annual return of less than 2% a year?

This is a HUGE part of the reason the typical household nearing retirement has an average of only $135,000 in their combined retirement accounts, which will provide only a $600 per month income, according to the Federal Reserve Survey of Consumer Finances.

That survey also showed that most households have little or nothing outside of the money in their retirement and investment accounts, which puts their entire life’s savings at risk in a market crash.

Wall Street’s BIG Lie is that You Must Risk Your Money in Order to Grow It

The Bank On Yourself safe wealth-building strategy puts that lie to rest. It’s a supercharged variation of an asset that’s grown in value every single year for more than 160 years, including during the Great Recession and Great Depression. It comes with an unbeatable combination of advantages, including:

If you’d like to see how adding the Bank On Yourself strategy to your financial plan could help you reach your financial goals without taking any unnecessary risks, just request your free Analysis here now.

There’s no cost or obligation, and you’ll get a referral to a Bank On Yourself Authorized Advisor who can answer any questions you may still have.

Keep in mind that the only regret most people say they have about implementing the Bank On Yourself strategy is that they didn’t start sooner and didn’t put more into their plan.

So don’t put it off another day – request your free Analysis NOW, while you’re thinking of it:

The Financial Shock that Can KILL You

Middle-aged Americans who experience a major economic blow are more likely to die during the years that follow than those who don’t.

That’s according to a new study published in the Journal of the American Medical Association.

Shockingly, those who experienced a devastating financial loss – called a “wealth shock” – have a 50% greater risk of dying early. And it doesn’t matter how much money you had to start.

How likely are you to experience a wealth shock?

About 1 in 4 people in the study have had a wealth shock, averaging a loss of about $100,000. Often it was a result of a drop in the value of retirement investments or a home foreclosure.

Some shocks happened during the Great Recession of 2007-2009. Some happened before or after that.

But it didn’t matter if the economy was good or bad – a wealth shock still increased the chance of dying early.

The findings suggest a wealth shock is as dangerous as a new diagnosis of heart disease, says Dr. Alan Garber of Harvard University. Another expert noted that,

We should be doing everything we can to prevent people from experiencing wealth shocks.”

[Read more…] “The Financial Shock that Can KILL You”

Why is the “Father of the 401(k)” Now Putting His Money into a Bank On Yourself-Type Plan Instead?

It caused quite a stir when the man who is credited with being the “father of the 401(k),” Ted Benna, recently announced that he’s put a substantial part of his own money – “probably the biggest part of my wealth” – into what is most commonly known as a Bank On Yourself plan.

You see, for at least six years now, Benna has been calling the 401(k) a “monster” that “should be blown up.”

Benna is credited with finding a way to capitalize on the tax code to create a way for working men and women to supplement the pension plans that many workers used to have. Those pensions plans have been disappearing, and 401(k)s were created to hopefully help pick up the slack.

But over the years, Benna watched Wall Street and Big Business pervert the 401(k) in ways he couldn’t possibly predict.

In a recent interview, Ted Benna discussed three reasons why we should be very leery of 401(k)s and IRAs:

  • The government may repeal the 401(k) and IRA, so you won’t be able to put any more money pre-tax into these accounts, or the amount you can put in will be drastically reduced (Congress considered doing that again last year!)
  • Benna believes the next stock and bond market crash is imminent and could wipe out 40% of the typical portfolio
  • Wall Street has hijacked these plans, and the excessive fees charged by mutual fund companies and plan administrators are robbing you of up to half of your nest egg

I’ve Been Sounding the Alarm About 401(k)s and IRAs for Even Longer than Benna

[Read more…] “Why is the “Father of the 401(k)” Now Putting His Money into a Bank On Yourself-Type Plan Instead?”

Federal Reserve Survey: Your 401(k) and IRA Won't Give You a Decent Retirement

If you’re counting on your 401(k) or IRA for retirement income, I have some bad news for you…

A new analysis of the Federal Reserve’s latest Survey of Consumer Finances by the Center for Retirement Research demonstrates that 401(k) plans are destined to fail millions of Americans.

The Federal Reserve survey is updated every three years, and the latest one reveals that, in spite of the long-running bull market and an improving economy … the typical couple nearing retirement will only receive $600 per month from their 401(k)s and IRAs combined.

That $600 a month is not indexed for inflation, so its purchasing power will decline over time.

And that $600 a month is likely to be the only source of income people will have to supplement Social Security because the typical household has virtually no other savings outside of its 401(k) and IRAs.

The Retirement Savings Shortfall News is Even Worse for Younger Workers with 401(k)s

[Read more…] “Federal Reserve Survey: Your 401(k) and IRA Won't Give You a Decent Retirement”