Preparing For Retirement: Thoughts About The Market
BOSTON (CBS) - I have more questions for you from the Fidelity's IQ Retirement Survey.
Question #2: How often over the past 35 years do you think the stock market has had a positive annual return?
Answer: The survey revealed that the majority of folks are unaware that the market has enjoyed a positive annual return 30 out of the past 35 year years. Historically the U.S. stock market has gained about 7% per year, so it's important to invest in stocks to provide opportunities for growth.
Only 8% of those surveyed answered correctly while 55-65-year-olds fared a little better at 14%. "Saving for retirement isn't simply about setting aside money from your paycheck, but also making that money work harder through a sound investment strategy that aligns with your goals," said Hevert. "Even with market volatility, the stock market has performed remarkably well over the long-term. The majority of investors need to have a diversified portfolio that includes equities to enable growth over time. If you're not investing, you're likely losing money due to inflation."
Question #3: If you could set aside $50 each month for retirement, how much could that end up becoming 25 years from now, including interest if it grew at the historical stock market average?
Answer: The correct answer is about $40,000, which 16% answered correctly.
However, nearly half (47%) underestimated how big an impact relatively small savings can have over time. Twenty-seven percent of respondents calculated the answer to be about $15,000, which undervalues the power of consistent savings and would represent a 0% stock market return vs. the market average of 7%. Saving regularly, combined with the power of compounding interest, illustrate why it's important to make it a habit to automatically set aside money at an early age. It's also the reason simply saving 1% more of your salary can add up—and the younger you start, the better.
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