It’s Not Too Late for Retirement Catch-Up

A small performance boost makes a big difference.

Somewhere around age 50 people start thinking about retirement.

It’s not so much that they’re ready to stop working, necessarily, but that enough life has happened to instill the knowledge that nothing lasts forever and it’s a good idea to be prepared.

So they run the most popular web search on this topic, which is: “How much should I have saved for retirement by age 50?”

From the sea of results emerge the following two takeaways:

• You should have already saved six times your annual salary. The Bureau of Labor Statistics reports that the median annual salary for workers aged 45-54 in the fourth quarter was $66,300. Six times that is $397,800.
  

• If you’re not where you want to be, you’ll need to catch up. Ideas for doing so include maximizing your retirement account contributions — to at least your full employer match, if you’re not already getting it — and taking advantage of the IRA catch-up contribution limit, which is $7,500 in 2024 for employees aged 50 and over. Some advisors suggest raising investing capital by withdrawing equity from your home, while others suggest reserving this money for living expenses in retirement.

These are fine suggestions, but almost nowhere will you read about catching up by boosting your investing results. Most planners assume an annual growth rate in the 8% to 10% range, an easy choice based on the stock market’s long-term 10% annualized pace. Assuming 8% is conservative.

It’s also depressing for somebody trying to catch up. If there isn’t meaningfully more in the paycheck for retirement contributions, and performance is stuck in the doldrums, the situation looks bleak.

But what if performance does not need to stay stuck in the doldrums?

Boosting it can dramatically change the picture. Why, then, does nobody discuss it? Because traditional advisors recommend only traditional allocations to traditional indexes, which guarantees middling performance — the traditional outcome. They frequently mention 8% because that’s all they’ve been able to achieve.

I know a better approach, a systematic one, and switching to it makes a world of difference in a person’s life. In this report, I’ll explore how much of a difference, proving that it’s necessary to leave typical advice behind in a quest for atypical results.