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Time is what keeps everything from happening at once. - Albert Einstein
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The Retirement Expectations Gap
The news these days is full of budget and debt problems in Washington and the tough decisions on the horizon.
The federal government is not alone in dealing with a resources versus commitments gap. Most individuals nearing retirement have a huge gap between what their available resources will support and their retirement lifestyle expectation.
There are solutions, but they require time and a high level of dedication. The stock market meltdown last year did not help as many investors scurried for the sidelines where they remain today.
Unfortunately, the illusion of safety created by sitting outside the market will ultimately be their undoing. For many, the prospect of ever fully retiring may move further and further out of reach.
Solving the Retirement Expectations Gap usually requires a single minded focus to save both inside retirement plans (401-k's, corporate plans, etc.) and outside as well. It also requires the understanding that in order to protect purchasing power, individuals must remain invested in equities, all the time.
We continue to think that most investors are operating outside the realm of reality when it comes to the retirement income needs and the pool of capital needed to fund and eventually resolve this gap.
- James E. Wilson, CFP® My Blog
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From the Fama/French Forum \ 8.25.2009
Long-term government bonds outperformed the S&P 500 Index by 0.12% per year for the forty-year period ending March 2009. Does a negative risk premium for stocks vs. bonds over such a long period challenge conventional thinking about risk and return?
Eugene F. Fama is the Robert R. McCormick Distinguished Service Professor of Finance at the University of Chicago Booth School of Business. Kenneth R. French is the Carl E. and Catherine M. Heidt Professor of Finance at the Tuck School of Business at Dartmouth College. Together, they answer topical and timeless questions at the Fama/French Forum.
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