Dan Weil “This Is a Dangerous Time to Be Close to Retirement” – Money News

Posted on :Apr 08, 2014

By: Dan Weil

Money News

April 8, 2014

Wall Street Journal columnist Brett Arends finds some troubling data in a new retirement investment report prepared by  money-management firm GMO.

First there’s this. Based on standard  industry assumptions about returns and volatility, you can expect that $100,000  invested in a typical retirement account when you are 25 will grow to about $1.2  million, adjusted for inflation, by the time you’re 65.

But that’s an  average. The result will be less than $750,000 more than half the time and less  than $350,000 a lot of the time, according to GMO, Arends writes.

That makes the $1.2 million figure useless for planning purposes, he  says.

Many financial planners look at historical returns to  determine future returns, but that’s problematic, Arends writes.

Since  1928, the S&P 500 has averaged an annual return of 9.6 percent and the  10-year Treasury note 5 percent, according to New York University’s business  school.

But that 5 percent is now a pipe dream with the 10-year yield at  2.73 percent, Ben Inker, GMO’s co-head of asset allocation, tells  Arends.

And given the lofty levels of price-earnings ratios using 10  years of earnings, stocks may struggle, Arends says.

“This is a  dangerous time to be close to retirement,” Inker says.

As for stocks,  the S&P 500 has gone without a 10 percent correction since October 2011.  That’s far beyond the 18-month average period between such corrections since  1946, as calculated by S&P Capital IQ.

But an adjustment will come,  experts say. “If there’s one guarantee on Wall Street, it’s that while a  correction may be delayed, they will never be repealed,” Sam Stovall, chief  equity strategist at S&P Capital IQ, told Newsmax’s Private Opportunities  newsletter.

Gold Goliath is not your typical gold dealer.

Visit Us On FacebookVisit Us On TwitterVisit Us On Google Plus