Here’s How to 3X Your Retirement Savings | Smart Change: Personal Finance | – WiscNews

To this end, loading up on stocks during your working years and shifting toward bonds as retirement approaches is a good bet. Bonds are a poor investment choice for your 30s and 40s because the returns they deliver may not be enough to grow your nest egg substantially over time. Stocks are, of course, riskier, but if you go heavy on them during your 30s, 40s, and even 50s, you’ll have the option to scale back as retirement nears.

Now, let’s assume you’re able to sock away $200 a month in a retirement plan over a 30-year period. Let’s also assume that during that time, your investments generate a 7% average annual return. That 7% return is a bit below the stock market’s average, and it also accounts for the fact that you may not hold such a large stock position in your retirement plan during your last few years of savings.

If you save $200 a month over a 30-year time frame, you’ll end up contributing $72,000 to your savings out of your own paychecks. But with that 7% return, you’ll end up with about $227,000 in your nest egg after three decades. That’s a little more than triple the amount you put in.

Now, watch what happens if you only score a 4% average annual return in your retirement plan because you stay away from stocks and load up on bonds. Assuming the same monthly contribution and savings window, you’ll be looking at about $135,000. That’s a decent gain, but you’re not tripling your money the way you would by investing in stocks.


Leave a Reply

Your email address will not be published. Required fields are marked *