Much has been made of the fact that for many of us, our wealth isn't enough to maintain our current lifestyle in retirement.
The general prescription for this problem is to increase our savings. But that's not the biggest issue, says John Bogle, the esteemed founder of Vanguard Group.
"Everybody's big focus is that we have to save more," he tells
The New York Times. "A greater part of the problem is the failure of investors to earn their fair share of market returns."
The fees we pay for our retirement investments eat heavily into our returns. Bogle has repeatedly harped on the high expense of actively managed mutual funds, which account for most of the choices in 401(k) plans, compared with index funds.
David Swensen, the legendary manager of Yale University's endowment, puts the issue bluntly. "Wall Street makes no money on low-cost index funds," he tells The Times. "That is the problem."
To be sure, all this doesn't mean that we should neglect the issue of savings. Surveys show that about one-third of unretired Americans have no retirement savings, including about 20 percent of households aged 55 to 64.
USA Today retirement columnist Rodney Brooks offers several ideas to build up a $1 million retirement nest egg.
- Save early and often to experience the magic of compounding. An annual return of 7.2 percent will double your portfolio in 10 years. And what about those of us in a higher age bracket who have ignored this advice? "You are trying to make up for what time has not done," Chris Chaney, vice president at Fort Pitt Capital Group, tells USA Today. "You have to save a lot more."
- If your company has a 401(k) plan, join it. You pay no taxes on your contributions until you retire, and many employers match at least part of employees' contributions.
- Utilize automatic deductions from your paycheck for savings. "You don't have to think about it," Bob Gavlak, a financial adviser at Strategic Wealth Partners, explains to USA Today.
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