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Don’t Make Me Say I Told You So 251

In this example, a $500,000 nest egg that earns 6% per year
will mean approximately $700,512 more in your retirement

accounts compared to earning a 3% return over a 20-year
period.

To achieve higher returns over time, follow these basic rules
of investing:

1. Stay focused on the long term. Remember that you may
be retired for many years, so you need to stay with a plan that

will foster growth of your retirement assets. Don’t focus on what

you should do over the next year or two.

2. Come up with an asset allocation plan for your investments.

If you need to earn 6% per year on your investment portfolio to
cover your income gap in retirement, you will have to allocate

a fairly sizable amount of your portfolio to stocks. If you only
need to earn 2% per year, then you can build a portfolio of

bonds, certificates of deposit, and money markets. If you need
to earn 10% or more to fill your income gap, that’s probably not

going to happen, especially if you are already retired. Instead of
relying on an unrealistic, overly optimistic rate of return on your

investments, come up with an alternative plan.

Chapter 6: Your Action Plan