The Surprising Secret to a Better Retirement

Would you like to save more and earn more? Thought so.

Jun 22, 2014 at 11:00AM


If you think of the secrets to a top-notch retirement, you'll probably come up with the usual suspects: save a lot, invest it well, and so on. Here's one you might not have thought of, though: get professional help.

The value of seeking assistance with your finances is nothing new to me -- The Motley Fool, for which I've long written, is in the business of offering such help. But it wasn't until I chatted with Scott Holsopple, managing director of retirement solutions with The Mutual Fund Store, that I got some concrete illustrations of the value of guidance. 

Holsopple offered two key bits of data. First, a Financial Engines report issued in May found that those who get help can improve their portfolio's performance by about 3 percentage points each year, on average, over those who don't. Further, per an ING study titled "Retirement Revealed" those who consult an advisor tend to sock away more money for retirement. Let's delve a little more deeply into each report's findings on the value of getting help.

Saving more
The ING "Retirement Revealed" report offered lots of eye-opening statistics, such as this: The average contribution to an employer-based retirement plan is 10% of income for those who use an advisor and just 8% for those who don't. The average total retirement savings is $110,000 for those who don't use an advisor and $172,000 for those who do -- a 56% improvement!

This information is useful, but there's more to know and think about. For example, while saving 10% of your income is much better than saving 8%, many of us should aim for contributions of 12%, 15% or even more, especially if we're late in getting started saving for retirement. Obviously, those whose retirements are 40 years away can contribute less -- but if they sock away more, they can set themselves up for an early retirement. And those who are just getting started a decade before retirement need to be aggressively saving.

Know, too, that a nest egg of $172,000 is far preferable to $110,000, but if that's all you end up with come retirement, you may still be in trouble. Many of us should shoot for $1 million by retirement, though a smaller amount may suffice as well. As a rough guideline, note that retirees often aim to withdraw 4% of their retirement savings per year. So savings of, say, $300,000 would yield $12,000 annually. Combined with all your other income sources, such as Social Security, will that be enough? Only you can say.

Earning more
A key factor in a retirement account's success is how briskly it grows over time. Financial Engines from 2006 to 2012 studied the performance of employer-sponsored retirement plans for more than 723,000 people, some of whom took advantage of "help" (defined as target-date funds, managed accounts, and online advice) and some of whom who did not. They found that "the annual performance gap between Help Participants' and Non-Help Participants' median returns was 3.32%, net of fees." Three percentage points may not seem like a big deal, but it is. As the report explains: "This difference can have a meaningful impact on wealth accumulation over time. For a 45-year old Help Participant it could translate to 79% more wealth at age 65.3." Consider that if you have $50,000 socked away and it averages annual growth of 7% over 20 years, it will total $193,000. But if it grows at 10%, it will become $336,000.

Managed accounts can be helpful because financial pros oversee your money and make many decisions for you. (Just watch the fees, as many charge a lot, and not all managers are equally skilled.) Target-date funds can help because they allocate your money in categories such as stocks and bonds, making adjustments over time (e.g., shifting from stocks toward bonds) as you approach retirement. Online advice can also also valuable, because online calculators can help you model what your nest egg may look like if you keep up current practices, and they can let you tweak several variables to see how your situation might improve if you, for example, make bigger annual contributions or change your asset allocation.

Other ways for people of all ages to seek financial guidance include reading up on financial matters online and in books, talking with and learning from your friends and relatives, and seeking out a financial pro on your own (you'll find a host of fee-only advisers at

This secret to a successful retirement -- getting advice -- is powerful. But so are others you'll run across, such as working for a few more years, exceeding the traditional 10%-of-income contribution to your retirement account, and investing better. Of course, a good financial advisor can help you make the most of these suggestions, too.

How to get even more income during retirement
Social Security plays a key role in your financial security, but it's not the only way to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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