There is no substitute for a disciplined savings strategy. This combined with a risk adjusted globally diversified portfolio will lead to a successful retirement. Unless of course, you believe you are smarter than every other investor in the world. Attempting to find the next hot investment class is futile and dangerous to your financial future.

1. The stock market will save you.
   Hopefully, the 2000–2002 bear market and the 2008 financial meltdown did away with any notion that the stock market can do your saving for you. For long-term planning, it’s smart to plan on high single-digit equity returns and (despite today’s extraordinarily low interest rates) about half that for bonds. Also, don’t assume the same return every year. Market returns (even real estate) fluctuate from year to year. Your planning should consider a range of outcomes to help assess the likelihood of meeting your goals.
2. There’s always Social Security.
   With Social Security, it’s especially hard to separate truth from fiction. According to some, the status quo is fine. Others see bankruptcy as imminent. The Social Security Administration projects that the current system is sound through 2036, but beginning in 2037 benefits could be reduced by 22% and could continue to be reduced annually.² One scenario we might see, besides benefit reductions and tax increases, is means testing, which could result in a middle-class squeeze: The wealthy aren’t eligible but are fine on their own, and the needy are entitled to receive full benefits, but those stuck in the middle get something less than hoped for. Wouldn’t it be preferable to save a little more for the future—even if it means spending a little less now—so you can treat any Social Security payments as icing on your retirement cake, rather than the main course?

Don’t be a “Gloomy Gus”

A small dose of skepticism can be healthy when it comes to conventional wisdom, but avoiding the Pollyanna label doesn’t mean you need to become a hard-core cynic. After all, a high single-digit return for stocks still means you could double your money every eight years or so, which wouldn’t be bad. And it’s doubtful that every last penny of Social Security will dry up or that every single corporate and public pension will fail. Stay balanced—don’t be overly optimistic and run the risk of failing to meet your goals because your plan depends on everything going just right, but don’t be overly pessimistic and sacrifice more of your lifestyle than is necessary.

Reality check: Spend less, save more

No other factor comes close to ensuring retirement success as the amount that you’re able to save. The flip side of that, of course, is how much you spend. Living below your means before retirement has a double benefit—it allows you to save more for the future and reduces the size of the nest egg required to maintain your standard of living. The alternative means growing accustomed to a lifestyle of spending you won’t be able to support when you stop working. Spend less and save more, and you won’t need to pin your hopes on wishful thinking.

If you do not know two numbers, expected return and expected volatility you are gambling with your retirement savings. Have a plan and stick to it.

Please comment or call to discuss how this affects you and your future.