Hi, Vince Oldre, certified financial planner. Do I want to talk to you about another question we often get, which is what type of return should you expect during retirement? Now it’s not that easy of a question to be answered because what you have to do is come up with what type of returns you need for your retirement portfolio to help you maintain your lifestyle in retirement.

For most of you, you might not need that much return to maintain your lifestyle, which then in return means that you don’t need that much risk. For some of you that might not have saved as much and you tend to spend a little bit more, then you might need to go for much higher returns, and with that, you might have to take a little bit more risk.

I’ll throw you for a little bit of a loop here, because when we look at the stock market and we look at the S&P 500, between 1980 and the year 2015 the market averaged 8-1/2%, so it might be just as simple as just putting your money into an S&P 500 index fund.

But if we were looking at the market overall and we knew that you were really bad at timing the market and you sold at the worst times and you missed the best returns and only had the worst returns during that time frame, you’d average about a 3-1/2% return. But if you’re really good at timing the market, you would average a 14-1/2% return, which means that you timed the market and only had the best returns and not the worst returns.

But here’s where it gets interesting. If you missed the worst returns and you missed the best returns, you would average about a 9-1/2% return, better than the S&P 500. What’s that telling you? That means that you really don’t need to take a lot of risks. At the same time, you don’t need to go for the big returns, to average better return than the S&P 500. So you can actually reduce that risk, maybe not go for the big home run returns, and average a little bit better than what the S&P 500 is.

What is that really telling you? You need to find out what type of risk is required for your retirement portfolio, how much risk do you need to take to maintain your lifestyle, or how much return do you really need to maintain your lifestyle. Once you find out how much return you need, then you can adjust how much risk you have to take.

If you need help with analyzing that, we do a risk analysis to figure out how much income you need from your portfolio and how much return do we need to help you maintain that lifestyle. If you have any other questions, please feel free to ask. I look forward to speaking with you next time.

What Type Of Return Should You Expect During Retirement?
5 (100%) 17 votes

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