News & Information

Invest to grow your account balance

Making sure you have enough money to last throughout your life in retirement is a big challenge. Running out of money is often the number one concern for many people who are planning their retirement. How you invest your savings can have a significant impact on your nest egg at retirement. Of course, the greater return you can achieve on your investments long term, the greater your account balance will be (and the longer it can last).

Earning just a little bit more on your money can make a huge difference. If you saved $100 per month for 30 years and earned an 8% rate of return, your account balance would be $149,036. If you earned just one percent more on your investment, your account balance jumps to $183,074. That’s a difference of over $34,000! Even if your time horizon until retirement is only 15 years, those extra returns can make a significant difference.

Although past performance is no indication of future results, historically equities (also known as stocks) have had the greatest long-term return potential. Over the past 20 years, stocks have produced an average annual return of 11.9 percent while bonds and cash have returned 7.4 and 4.6 percent, respectively.¹

The returns on stocks do not come without a price. You can expect to see more volatility (ups-and-downs in return) in the short term compared to other investments. However, don’t let that scare you off. If you have at least 10 years until you plan to use the money there is time to ride out those short-term bumps. Remember, because you will likely spend many years in retirement, you may want to continue investing in stocks even though you are no longer working.

Balance is the key and your time horizon and tolerance for risk should be the drivers of your overall diversified portfolio. However, it’s a good idea to evaluate where you are in terms of generating enough income to last a lifetime. If you aren’t on track, consider investing a bit more aggressively to generate a potentially higher return. It can be worth it in the long run.

¹ Ibbotson Associates Inc., Stocks, Bonds, Bills and Inflation 2006 Yearbook.