It is alarming to me to read that a significant percentage of young investors do not trust the stock market so much that they do not include equity in their retirement plans.

I’m not sure I really believe that, but working with investors for over half a century has taught me that emotions can easily transcend logic and facts, leading to unsuccessful results.

For all those who doubt the long-term advantage of stocks over bonds, I will present my best case today.

This is one of the dozens or so large forks that investors face. Everyone can have a huge impact on long-term retirement planning. I think each of them can cost $ 1 million or more.

Instead of bonds, stocks are the grandfather of all these forks.

Obviously, you are not just making decisions, you are immediately finding your wallet or wallet full of big bills. You just have to be more discriminating with the help you render toward other people. I’m sorry that!

Read. My son is 15 years old, he just got his first job. How do I get her to start saving for retirement?

To make sense of numbers, we need a general set of assumptions.

Thus, in the discussion of this series և the following series of articles, we will make three main assumptions.

  • First, the 25-year-old starts saving $ 500 a month and continues to do so for 40 years. $ 500 can be a challenge in $ 25. But I do not spare any increase in the interest rate on these savings. So it’s probably going to get easier over time.

  • Second, this investor retires at age 65 and lives for 30 years. When he retires, he withdraws 4% of his account balance at the beginning of each year.

  • Third, his lifetime reward for all this is the sum of 30 withdrawals per year, plus the value of the portfolio when he reaches 95 և his heirs inherit that amount.

1928 The S&P 500 was 11%, but for this discussion I guess 10%. Medium-term US government bonds amounted to 5%.

Based on these historical revenues և my three assumptions, here is a table that shows the results of the three choices of our chosen investor.

If you die in retirement, stocks vs. bonds

Placement of shares




Life saving

$ 240,000:

$ 240,000:

$ 240,000:

The value of the portfolio is 65

$ 744,282

$ 949,584

$ 2.8 million

Total withdrawals

$ 1 million

$ 1.7 million

$ 8.2 million

The value of the portfolio is 95

$ 945,265:

$ 2.3 million

$ 14.3 million

If death pays

$ 2 million

$ 4 million

$ 22.6 million

Source: Merriman Financial Education Foundation

The conclusion (literally) shows three very different results from the same $ 240,000 savings. The only differences are in the mix of stocks and bonds.

There is one more interesting detail hidden in the underlying data. These results are based on the premise of saving $ 500 per month. To calculate the average column numbers, we assumed that the monthly stock was only $ 50 (10 earned 10%).

That’s just $ 600 a year, or $ 24,000 for 40 years. At age 65, that portion of this “average” portfolio was worth $ 279,730. With a total withdrawal of $ 824,733, this partial portfolio (invested in 100% stake) was worth $ 1.4 million for a total “payment” of $ 2.3 million. (That $ 2.3 million is the $ 4.0 million equity component of the table).

Translation: If you want to pay significantly more than $ 1 million for a lifetime (as I mentioned above), you can get it from just $ 50 a month in savings 10 10% long-term income plus all the patience.

If you think the comparison of my stocks and bonds is worthwhile, look for future articles. We will compare the small cap with the large one, the cost for the mix և show what can happen based on our 40-year assumptions, saving $ 500 per month և retiring for 30 years if you combine the portfolio of four US funds. which included large and small, value և mixture.

For more information, check out my podcast, Shares vs. Bonds. All or nothing. And here is the link to the free copy We are talking about millions. 12 Simple Ways to Recharge Your Retirement,

Richard Buck contributed to this article,

Paul Meriman և Richard Buck is the author of Talking Millions. 12 Simple Ways to Recharge Your Retirement,