THE NEW RULES OF RETIREMENT SAVING • 33
That’s right. If the market drops 50 percent, your account needs to grow by 100 percent to make up that loss. So when the market dropped 22 percent in 2002, and went up 28 percent in 2003, many savers were still under water: they hadn’t earned back eve- rything they had lost. Let’s put it another way. You have $10. You lose 50 percent of it. Now you have $5. You grow that money by 50 percent. Now you have $7.50. You’re still $2.50 short of where you started. Chasing Growth There’s one simple question I like to ask new clients about their retirement savings: How much do you expect to earn on your re- tirement savings this year? Guess which one is the most common response I hear from cli- ents:
a) 9 percent b) 7 percent c) 4 percent d) I have no idea If you guessed D, you’re right. Now you know why.
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