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You need growth potential, but market losses can take you off track
If you’re relying on withdrawals from investment accounts for income in retirement, market volatility can take a toll. Withdrawals when the markets are down can compound the effects of losses, which makes it even harder to recover from a decline. And, as challenging as the markets can be, investor behavior shows that investors often underperform the markets.
You’d need to earn more than the average S&P return to recover from a 20% market loss when taking just 4% annually in withdrawals.
The average rate of return for the S&P 500 over a 5-year time period was just 5.6%.1
Invested amount: $100,000
$100K
$75K
-20% in market loss
11.9% needed over 5 years to recover
12345
While taking
4% annual withdrawals ($4,000 for 5 years), you’d need 11.9% compounded annual growth to get back to your $100,000 initial investment.
Hypothetical chart for illustrative purposes only; it does not represent actual or future performance of any speci c product or investment strategy. It is not possible to invest directly in the S&P 500 or any other index.
It takes higher returns to make up for losses—especially when you take withdrawals—and investors can also underperform the markets.
Investors may have found themselves unintentionally underperforming the markets. Over a 30-year period, investors underperformed the S&P 500 Index by 5.88%.2
1 The average annual rate of return for the Standard & Poor’s 500 from December 31, 1999, to December 31, 2019, was 5.6%.
2 “Improving Financial Outcomes and Client Con dence Through the Confluence of Human and Digital Advice,” Jack Sharry, Wayne Chopus, and Corey Walther, IRI Insight, Issue 3 Vol 10, Fall 2019. Stats attributed to the 2018 DALBAR Quantitative Analysis of Investor Behavior.
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