Knock Knock. Who’s there? Retirement.

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The market is nearing all time peaks, and investors are realizing the strong fundamental economic narrative is not crumbling despite the many negative headlines. But are you participating in what will soon be the longest bull market in history or are you playing it “safe” in cash? Men who are 65 years old today can expect to live to age 83 and women who are currently 65 can expect to live until 86. Most people have not saved enough to fund their retirement years and need their money to work for them while they are sleeping. According to Bankrate, an investment in a money market fund is likely to pay about 0.2%. A one-year CD currently offers an average yield of 1.28%. These options do not keep up with inflation and therefore are eroding your purchasing power. Retirement investors need to consider tapping the potential of the equity markets to build the wealth they need to cover healthcare costs, let alone the silver fox sailing lifestyle generally depicted in retirement brochures. Although it is wise to save as much as possible, the market may be able to do some of the heavy lifting to grow your nest egg. Markets do have ups and downs. Diversification can help with the inevitable bumps, and often detrimental investor knee-jerk reactions, when market volatility spikes. The key to saving is starting early. Consider this example: Jim saves $5,000 a year from age 25 to age 35 before quitting his job to travel the world, terminating his contributions. Alternatively, Joe travels the world after college and finally gets a job at age 35, diligently saving $5,000 a year from age 35 to age 65. Assuming a realistic 6% rate of return, at age 65 Jim will have $401,230 and Joe will have $419,008. Joe’s nest egg is only marginally higher even though he saved for 20 more years than Jim. Ah, the power of compound interest. Einstein called it the eighth wonder of the world.

Please see an example of effective diversification on page 4 of the Global Perspectives book.

This hypothetical example is for illustrative purposes only and does not represent an investment in an actual product. It does not take into account the effects of taxes or withdrawals.

Diversification does not guarantee against a loss, and there is no guarantee that a diversified portfolio will outperform a non-diversified portfolio.

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