I am 10 years into a 20-year written financial plan that requires an 8% return, but I'm only getting a 4% return. What can I do about that?
Answers | 3
In a nutshell, there are 4 solutions.
These are the 3 Financial Planning solutions:
1) Increase your time, i.e wait another 20 years to retire
2) Increase the amount you put in, i.e. double your contributions
3) Decrease your living expenses, i.e. cut your expenses in half
Now, the other solution is the Investment Management solution.
4). The mathematical solution is to double your return to 16% compound annual growth rate (CAGR)
This is our preferred answer and we have both the integrity and experience to do this.
It's your decision to make. Keep in mind that when the firm that created the plan charges you a fee to "modify" your plan, that is not a solution. We do not charge a fee to correct our mistakes.
What you may have to do is consider taking more risk in your investment choices to bring your plan into that 8% range, but understand that RISK does not mean it will always pay off. You can gain a greater return or lose more when you take on more risk.
With ten years on your time horizon, you may need to save more money and keep a conservative approach. You may want to review what you're doing to make sure you don't drop below 4% for the rest of the ten years.