Originally Posted by cboy
Sarcasm aside (and I do appreciate your point), over the past 60 years the market has had a compounded annual return on investment of about 10.5% per year. So if you are getting a 12% return on your personally managed 401K over those years you are beating the market and you deserve a lot of credit. The fact is most people don't come anywhere near matching the market's return. In fact (well, if you believe the sources quoted by the Motley Fool it's a fact) 3 our of every 4 professional money manager looses money to the market average year in and year out. And they are the PROFESSIONALS. So it is little wonder that the average Joe falls far short of that 10% return. Also note that I never said a 12% average annual return could never be achieved. Mathematically it is certainly possible. What I'm saying is that in reality, on average, the American investor has been achieving far under that rate of return. As a result, I think your financial projections would be more realistic if it reflected the earning an average Joe achieves rather than the earnings he might possibly achieve. Most of the projections I've seen use a more conservative 6-8% rate of return for medium risk investment and 3-4% for low risk.
Sorry about the sarcasm. My kids and I have always used zingers from movies like the Pink Panther series, Police Squad, Ace Ventura, Napoleon Dynamite, etc., whenever the opportunity arises (like when a city policeman gave a presentation to my daughter's 5th grade class and was extracting an oath from the kids; he said, "Repeat after me . . ." and she said, "after me, after me, after me, after me . . .". I was chocked up I was so proud a father!).
Yes my result has exceeded the market in general but again that wasn't my fault, believe me. I am a total loser whenever I try to play the market myself. All the credit goes to the mutual fund managers @ Putnam, Vanguard, & Fidelity. The aggressive growth funds managed by those pros should and do beat the general market by a point or two. Go to their websites and look at their various funds (which would be the type offered in the personal savings accounts in the new SSI). The more aggressive ones are well above 10%, long term. Granted they went negative during Clinton's recession but I couldn't care less. Over the 40 year period of my career, NOTHING beats the market, long term, let alone the govenment account which after 60 years and multiple $trillion invested, is @ $0.00.
And note that in the low case I posted above (the guy who starts out in a @ $20,000/yr job) was conservative. I gave him a 7.5% return on savings before retirement, 3% salary inflation (basically, inflation rate - he was barely above entry level his whole career) and he still retires w/ $1,000,000 in his retirement account. I think I used a pretty conservative and do-able case. Even if he only achieves half that performance and retires w/ $500,000, that gives him more than he gets from the government and it is his to pass on to his progeny if he so desires.
The second example where the guy hustles a little and gets a college education, gets a pretty good job, and is smarter than you and me and achieves the attainable higher 12% rate in the market retires a multi-millionaire.
Point is, ANYTHING an individual does with that money is better than what we have now with a government that has extorted 15% of his income, stolen $trillions from the resulted 'savings account' leaving it bankrupt and the average Joe with a below-poverty stipend of $1800/mo and even that will be defaulted on in the next few years unless they raise the tax rate on our children to 80%.