Retirement question.

what's a good rate of return on a 401k??

 

Depends on the risk level of the investment ( relative to a benchmark ) and the fees associated with the investment.....

 

if you're not retiring soon, you should hit the S&P performance or higher.

fees should be LOW - <1%.

 

easier said than done. but the S&P 500 is a good benchmark for most people. Although it really depends on the investment goals and risk tolerance of the individual investor.

Age/time to retirement is he biggest driver. I have much different goals for my accounts versus my mother's. She is 72 years old so we try to beat inflation. 5% to 6% is more than enough. However, I am much more aggressive with my account and benchmark my accounts against the S&P. I have built my forecasting models using a 10% average rate of return.

 

pretty easy to buy an index fund...

 

which will never match the inex due to expenses.....:newsmile26:

 

I'm sure I'll miss that 0.19% :massbooty:

 

I was commenting more on your commet that they should hit the S&P 500 or higher.

To meat's point, you will never hit the S&P 500 with an index fund because of expenses...and it has been proven that actively managed funds have a tough time beating the S&P 500 over an extended period of time.

My philosophy is to stay diversified across several asset classes and regularly rebalance my accounts back to my asset allocation. Last year I was able to beat the S&P 500 by over 200 basis points thanks in large part to my exposure to REITs and International. However, I recognize that will not occur every year.

 

Compounded, it's ALOT.

 

So what should we expect the average return on the market to be going foward? I know it's historically been in the 10%-11% range but given the post 9/11 world in which we live, should we expect to earn less? Maybe 8% average return? Anybody? A lot of the retirement models ask this question, and small difference add up.