Americans Aren’t Saving Enough for Retirement, but One Change Could Help
Assuming an annual market return of 7 percent, he says, a 30-year-old worker who made $30,000 a year and received a 3 percent annual raise could retire at age 70 with $927,000 in the pot by saving 10 percent of her wages every year in a passive index fund. (Such a nest egg, at the standard withdrawal rate of 4 percent, would generate an inflation-adjusted $37,000 a year more or less indefinitely.) If she put it in a typical actively managed fund, she would end up with only $561,000.
.. If there is an industry rived with conflicts of interest, it is the financial conglomerates that advise Americans on investing these savings. Yet nobody was paying attention to the safeguards that might be needed when corporate retirement funds managed by sophisticated professionals were replaced by individual 401(k)s and Individual Retirement Accounts.
“Wall Street makes no money on low-cost index funds,” said David F. Swensen, who runs the investment portfolio for Yale. “That is the problem.”