Defined Contribution Plan Sponsors
Successful Investing
A key driver of retirement success is of course investing properly. This is particularly crucial from age 45 on, as one's asset balance is typically high enough that investment returns take on added importance. Looking at the chart, an additional percentage point of investment return earned at age 55 is nearly four times more powerful than that same percentage point of return earned at age 30, because it is applied to a larger asset base. While the returns earned at age 55 have less time to compound before retirement, our modeling suggests that a typical 55-year-old's balance is expected to be around 15 times higher than that of a typical 30-year-old because of the effect of cumulative contributions and investment returns.
Plan sponsors should be thinking about how to construct a robust menu of investment choices that will facilitate an improved investing experience and outcome.
DC 20/20: Bringing the Key Drivers of a
Secure Retirement Into Focus
Assumes median outcome for a worker beginning career with US$25,000 income growing at 1% annually. Assumes 6% real equity return, 3% real bond return, Wellington Management glidepath, 7% initial savings rate growing to 13% (including employer match). Source: Wellington Management