Investing for retirement - It's a crapshoot

[shotgunner]

Something I don't like to admit to myself but know it's true. At least in all the examples given over 30 years each investment of $100K went up.

Of course to a great extent the same thing applies to one's health and longevity.

missing-investing-ingredient: Personal Finance News from Yahoo! Finance

 

[walkinwood]

Well written even if I didn't find anything new.

This line summed it up for me

Much of this advice is already well known, and yet investors still seek out hot sectors and fund managers, and typically don't save as much as they should.

 

[REWahoo]

I thought this was a very interesting observation:

But academic studies have found that most people don't fully appreciate the role of chance in their investment results. "We have an asymmetric view of good and bad luck," said Shlomo Benartzi, a business professor at the University of California, Los Angeles. "It's well established that people attribute bad luck to randomness, but then attribute good luck to their own skill."

 

[FUEGO]

This is good information. The fact that the 30 year returns could vary from 7.6x to 22.7x depending on which year you happened to make the initial investment. But it doesn't adjust for inflation, something that has varied from being very low single digits for some decades to being low double digits other decade(s) IIRC.

I would be interested to see what 30 year periods of dollar cost averaging look like in terms of variability of final portfolio values. I imagine it would dampen the variability of returns some, but not hugely. Most of the returns will be determined by the timing of the annual returns. Those 30 year periods where the first part had low returns and the latter part has high returns will outperform the periods where the first part had high returns and the latter part has low returns.

 

[Onward]

I liked this part:

"Ask yourself what the risks are of oversaving, and compare that to the risks of and consequences of undersaving, which are huge"

 

[LOL!]

Jim C. Otar's book "Unveiling the Retirement Myth" talks about luck in a big way. We discussed the book a few months ago.

 

[clifp]

"And crossing our fingers can't hurt, either"

Ok is the true? I wonder if permanently cross your fingers wouldn't have some detrimental effects on your health. I know it makes touch typing really slow and painful.

 

[Alan]

Jim C. Otar's book "Unveiling the Retirement Myth" talks about luck in a big way. We discussed the book a few months ago.

While reading the above article I remembered his book talking a lot about luck.

 

[ziggy29]

This is good information. The fact that the 30 year returns could vary from 7.6x to 22.7x depending on which year you happened to make the initial investment. But it doesn't adjust for inflation, something that has varied from being very low single digits for some decades to being low double digits other decade(s) IIRC.

Although this wasn't what Warren Buffett was referring to when he talked about the "birth lottery," it does show that when you were born is also important along with where you were born and whom your parents are.

I get more and more of a feeling as time goes by that I was born at just about the worst possible time economically. My parents, on the other hand, were born at just about the best time.

 

[FUEGO]

I get more and more of a feeling as time goes by that I was born at just about the worst possible time economically. My parents, on the other hand, were born at just about the best time.

It's tricky to look back and evaluate when was the optimal time to be born or enter the work force.

I started working in 2004, and so far it looks like it was a decent time to come of age. Jobs weren't too hard to come by - not the best hiring environment, but not the worst. I managed to get a ridiculously low interest rate on mortgages, and lock in even more ridiculously low fixed rates on 30 year student loans. And although I have not yet made a lot of gains in the stock market from 401k contributions and IRAs, I imagine dollar cost averaging into the market during periods of low relative valuation (ie following a major market decline) will pay off long term.

Point is that there are pros and cons to starting at any given time. Someone starting today would be investing in a low(er) valued market, locking in 30 year mortgages at record lows. If they can find a job that is.

 

[REWahoo]

I started working in 2004...

I forget sometimes what a young whippersnapper you are....

 

[FUEGO]

I forget sometimes what a young whippersnapper you are....

A child of the 80's!

What's strange is that I've been active on this forum in some incarnation or another almost all of my full time professional career.

 

[Bikerdude]

I get more and more of a feeling as time goes by that I was born at just about the worst possible time economically. My parents, on the other hand, were born at just about the best time.

I would be careful mentioning that to someone born in 1920.

 

[BigNick]

This is good information. The fact that the 30 year returns could vary from 7.6x to 22.7x depending on which year you happened to make the initial investment.

For people saving for retirement - as opposed to when you take the accumulated lump sum and move it into place to generate income on the day you FIRE - I think that's more or less irrelevant. Savers don't invesy $100,000 in one year and sit on it for 30. If you invested $5,000 per year for 30 years starting in 1980, 1981, or 1982, your results are going to be pretty similar.