Third Quarter – 2018

Quarterly Newsletter to Retirement Plan Participants

Market Update

One of the primary themes we’ve been emphasizing over the past few years has been the likelihood of higher interest rates, and the impact that could have on portfolio returns. As you can see from the arrow chart below, bond returns are in the red, and have been all year as the Fed has been raising rates in response to a stronger economy. When interest rates rise, bonds returns fall, and we expect rates to rise further into next year, which is why we’ve been advocating less bond exposure in portfolios, and more equities.

If you own a Target Date portfolio, your bond holdings vary based on your age. The older you are, the closer you are to retirement, which translates to more bonds in your portfolio. For example, if you are 40 years old, your target retirement is roughly 2045; that portfolio holds approximately 20% bonds, 80% stocks. The 2025 fund is closer to 40% bonds, 60% stocks. Generally speaking, bonds provide a buffer in volatile times for stocks, but can dampen returns when interest rates are rising.

Clients often ask us whether they are “on track,” given what they’ve saved and the size of their retirement nest egg. According to a recent Fidelity study, the
average 401(k) balance for 50 – 59 year olds is $174,200. For most people looking to retire with an income of $5 – 6K per month, that’s not enough. In simple terms, the table below provides rough “on track” guidelines for retirement savers:

• By age 30: Have the equivalent of your starting salary saved
• By age 35: Have two times your salary saved
• By age 40: Have three times your salary saved
• By age 45: Have four times your salary saved
• By age 50: Have six times your salary saved
• By age 55: Have seven times your salary saved
• By age 60: Have eight times your salary saved
• By age 67: Have 10 times your salary saved

 

These guidelines make it clear that the best approach is to save early, aggressively, and for a long period of time. Financial security means different things to different people, but for many, financial security means “Can I retire comfortably?” Working with an advisor or planner to model retirement income, taxes and expenses is an important step toward developing a game plan for spending, saving and investing. At EMBREE, we’re here to help. If you’d like to get “on track,” or are interested in creating a simple action plan, give us a call!

Plan Update

Please see the accompanying performance spreadsheet for updated returns on your
investments.

EMBREE FINANCIAL works diligently with the 401(k) Investment Committee to provide you a best‐in‐class Retirement Savings Plan. Together, we regularly monitor investment performance, mutual fund quality and plan costs.

Please contact us at 312‐527‐5565 if you have any questions regarding your Plan, expenses, industry trends or your own retirement strategy.

Market Returns YTD 2018

Please  contact  us  at  312‐527‐5565  if you  have  any  questions  regarding your Plan, expenses, industry trends or your own retirement strategy.