Markets, Financial Planning, Retirement

Savers Look To The Stock Market For Better Growth

7/27/18 8:00 AM

iStock-626627280.jpgNot even a third of working Americans believe that their retirement savings are “on the right track,” according to a survey conducted by Hearts & Wallets. Many respondents also said that they wish they were doing a better job of regularly setting money aside, and 31 percent admitted that they are uncertain how they will fund retirement. To help increase their old-age financial preparedness, a larger number of pre-retirees compared to earlier surveys have become open to utilizing tax-advantaged 401(k) plans and other employer-provided resources as tools for growing their nest egg. More than a quarter (27 percent) of respondents even said that they are comfortable accepting greater stock market volatility in exchange for the chance of generating higher investment returns on their savings.

Similarly, a new Gallup poll found that a majority of Americans view participation in the stock market as the best long-term investment, particularly through the use of index funds, mutual funds, and ETFs. This is encouraging since exposure to equities can be a great way to grow one’s savings and amass wealth. For example, if you invested in the benchmark S&P 500 index at the start of each year and maintained a holding period of 15 years, according to an earlier Pension Partners analysis, then historically (going back to 1928) you would have had a 98.7 percent chance of a positive return. Performance was even better for investors who utilized dollar-cost averaging. Despite such favorable statistics, it is important to remember that participation in the stock market is not risk free. It is possible, though, to reduce one’s exposure to many “known unknowns” with a diversified portfolio that not only has a healthy mix of assets but also takes into consideration your unique risk appetite, required rate of return, nearness to retirement, and other variables that can evolve over time.

However, constructing such a portfolio, along with making periodic adjustments, can be too complicated and time-consuming for many retail investors to tackle on their own. As a result, a better option for some individuals may be to instead regularly work with a financial advisor since these professionals can help simplify everything and make sure that a client’s investments remain aligned with the desired retirement outcome. Many Americans are already aware of the benefits of consulting with an advisor, as evidenced by a recent Nuveen poll which found that more than three out of four investors currently rely on a financial professional to help with their retirement income planning. Fifty-six percent of surveyed investors also said that they intend to work with an advisor within the next six months to construct a portfolio that can help them generate a steady stream of cash income while still seeking to preserve capital.



Sources: Hearts & Wallets, Gallup, Pension Partners, Nuveen

Post author: Charles Couch