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If You’re Focused on Saving Money for Retirement, Your Focus Is on the Wrong Thing!

by Samuel N. Asare

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One of the most unfortunate and expensive mistake anyone can make in planning for their retirement is focusing exclusively on savings. I’d understand if you were a bit perplexed about my rigid insistence on this, because it runs completely counter to most financial advisors’ advice: “All you have to do is save, save, save!”

Let me direct your attention to an interesting dilemma: Wouldn’t you agree that almost everyone saves moneytoward retirement? That’s what American workers are trained to do. Yet somehow, only a tiny percentage are able to achieve a comfortable retirement – financially speaking – which means that the majority miss the mark, some quite significantly. While various reasons may account for this, my years as eyewitnesses into people’s retirement planning indicate that saving too little money is not one of them.

Most future retirees miss the boat because they focus on saving money without worrying about where they save it. Think about it this way: If the container into which you are saving has a leak, most of your savings will eventually drain out. Meanwhile, someone else who puts their savings into a leak-proof container will keep all their money and likely end up with much more than you, in spite of the fact that you might have “saved” a lot more money.

Let me use a hypothetical scenario to prove this point. Assume it is January 1, 2007, and your investment account has a balance of $100,000. Let’s also say you’re using a traditional investment vehicle, whereby you can make unlimited gains or losses. For this scenario, we’ll put your investment in the S&P 500 Index. Let’s call this Strategy X.

Here are the results of your hypothetical investment over the past five years:

  • The beginning $100,000 gained 3.53%, growing to $103,530 in 2007.
  • Then it lost 38.5% and ended 2008 with a balance of $63, 671.
  • Then it gained 23.5% and rose to $78,634 in 2009.
  • It again rose in 2010 by 12.8% to end at $88,699.
  • Then in 2011 it remained flat at 0% to end at $88,699.

Now let’s turn our attention to a little-known approach we will call Strategy Y. Under this strategy, instead of putting your money directly into the stock market, we will link it to the growth in the same S&P 500 index in which Strategy X invested. However, we are going to cap your gains at 10%; but you will be guaranteed a minimum interest of 0%, so when the S&P 500 plunges, you won’t lose anything. To prove my point beyond all doubt, I’m going to fund Strategy Y with $80,000, a full $20,000 (or 20%) less than the $100,000 with which Strategy X started! 

Now pay very close attention to the mathematical breakdown of this $80,000:

· In 2007, you gained 3.53%, increasing to $82,824.

  • In 2008, since the S&P 500 lost money, you earned 0%, but kept your $82,824 balance, unharmed.
  • In 2009, your gain was capped at 10% (although the index earned 23.5%), leaving you with an ending balance of $91,106.
  • You gained another 10% in 2010 (out of the index’s 12.8% actual gain) and ended the year with $100,216.
  • In 2011, your balance will hold steady at $100,216 (since the index returned 0%).

There may be some who will try to argue that my analogy focused only on the most recent five years (January 2007 through December 2011), and should have covered a much longer time period. The problem with that argument is that it fails to recognize the fact that it takes only one dip to ruin everything, when it comes to investing. You see, whenever your investment loses money, it is your entire balance (made up of all your contributions and gains up until that point) that suffers, isn’t that true?

So where is your nest egg saved? Is the container that’s holding your life savings reliable? Please don’t take a chance with your retirement because it’s one loss you don’t want to endure. We invite you to schedule a private, complimentary consultation with one of our experienced professionals to find out what you can begin doing today to fix any leaks in your retirement fund container. 


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This website is for informational purposes only. All opinions expressed are solely those of Laser Financial Group, LC., and our editorial staff. The information is not to be construed as any form of professional advice, nor as solicitation for the purchase or sale of any security, whatsoever. No particular outcome is guaranteed. No strategy can guarantee a profit, protect against loses, or ensure peace of mind. Recommendations are based solely on third party insurance products for which we receive compensation. Laser Financial Group, LC, does not provide investment advisory services. This does not constitute an offer to provide services in any jurisdiction in which such offer or solicitation would be unlawful under the laws of such jurisdiction. Any United States tax reference on this website is not intended to be used, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code, or promoting or recommending to another party anything addressed herein.

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