Inequality, Retirement, Returns, Risk: What are the Threats to Your Financial Plan?

Mike Jones Inequality, Retirement, Returns, Risk: What are the Threats to Your Financial Plan?

Mike Jones

Investment Insights

Mike Jones

I recently came across one of the more relevant and thorough articles on investing and retirement planning that I have read in quite some time, but as it was 10 pages long I fear that even a summary of it would be more than the scope of this monthly newsletter could bear.

Instead I’ll take a slightly different approach with this month’s column and will quote the author four times and add my comments and perspective after each quote.

The Fatal Flaws In Your Financial Plan
February 21, 2017 by Lance Roberts of Real Investment Advice

1. From the article:

Inequality, Retirement, Returns, Risk: What are the Threats to Your Financial Plan?

With the average American still living well beyond their means, the reality is economic growth will remain mired at lower levels as savings continue to be diverted from productive investment into debt service. This skew in wealth, between the top 10% and bottom 90%, has distorted much of the economic data which suggests savings rates and incomes are rising across the broad spectrum of the economy. The reality, as shown by repeated studies and surveys, is an inability for many individuals to meet even small emergencies, much less being anywhere close to having sufficient assets to support a healthy retirement.

My comments: This data is very revealing and very disturbing. Over the last 30 years the great American capitalist experiment has worked well for the top 20% of wage earners. The top 10% especially so. This means that over 240 million people in the richest country in the world have largely been left out. This tells me that it is an issue that must be addressed by leadership. It also tells me that one should pay critical attention to the work that they do and the ability to move upward toward that top 20 percentile if a financially fit retirement is a goal.

2. From the article:

Inequality, Retirement, Returns, Risk: What are the Threats to Your Financial Plan?
Take a look at that graphic carefully.

  • 33% of Americans have $0 saved for retirement.
  • 56% only have $0-$10,000.
  • 66% have less than one-year of median income saved.
  • 74% have less than $100,000 saved for retirement.

With 3/4th’s of America dependent upon an already overburdened social security system in retirement, the “consumption function,” on which roughly 70% of the economy is dependent, is being grossly overestimated.” In other words, 74% of Americans are “hoping” the financial markets will bail them out of their “under- saving.

My comments: To paraphrase: people aren’t saving enough, consumerism is winning the day over savings, and most people are hoping that investment returns are going to bail them out. Tragically, in most cases this is not going to happen.

The gap is simply too wide. And while most of us would like to blame the meager returns of the securities markets since the year 2000, it is the lack of disciplined spending and saving that is the major contributor to poor retirement readiness.

Become a saver. Start now. Set up a systematic way to put money aside every time you earn some. If you are blessed to live to old age it will be one decision that you most appreciate from life. Not last year’s return on the S&P 500.

3. From the article:

Importantly, the return that investors receive from the financial markets is more dependent on “WHEN” you begin investing with respect to “valuations” and your personal “life-span.”

The single biggest mistake made in financial planning is NOT to include variable rates of return in your planning process.

Furthermore, choosing rates of return for planning purposes that are outside historical norms is a critical mistake. Stocks tend to grow roughly at the rate of GDP plus dividends. Into today’s world GDP is expected to grow at roughly 2% in the future with dividends around 2% currently. The difference between 8% returns and 4% is quite substantial.

Also, to achieve 8% in a 4% return environment, you must increase your return over the market by 100%. The level of “risk” that must be taken on to outperform the markets by such a degree is enormous. While markets can have years of significant outperformance, it only takes one devastating year of losses to wipe out years of accumulation.

My comments: I have spent the last 20 years trying to get this point across to, well, just about anyone who would listen.

Doing retirement planning and forecasting future investment returns by looking at long term investment data is flawed. Most people have a 20 to 30 year span of time to make and save the money they are going to use in retirement. As a result, the individual investor must be more in tune with the business cycle, bull and bear markets, and valuations than the endowment or the pension fund investor.

No one, and I mean no one can time the market. But making intelligent asset allocation decisions based on current valuations and opportunities must be incorporated into the investment process for the individual. One can’t simply allow the determining factor for investment success to be the year in which you were born and where the markets just happen to be when you are between the ages of 45 and 65.

4. From the article:

RISK does NOT equal return. The further the markets rise, the bigger the correction will be. RISK = How much you will lose when you are wrong, and you will be wrong more often than you think.

My comments: As I approach my 60s I can report to you that I get this. I get this because I have seen the consequences of simply believing that if one takes more risk one will be rewarded. I have seen it in others. I have seen it in my own investment decisions. Risk has its place in investing and is necessary, but it has become my goal as an investment manager to attempt to only incorporate as much risk as is necessary to accomplish investment goals. I also know that I must monitor that risk very closely and be prepared to adjust portfolios as needed.

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Byron R. Moore, CFP® is Managing Director / Planning Group of Argent Advisors, Inc. Mike Jones is Managing Director / Investment Group of Argent Advisors, Inc. Write to either at 500 East Reynolds Drive, Ruston, LA 71270 or call (318) 251-5800. This newsletter is available via email on a free subscription basis. You can subscribe by clicking here. Direct any questions, comments or suggestions to Byron Moore at or to Mike Jones at
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Argent Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.
Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. The opinions of any single advisor do not necessarily reflect the opinions of Argent Advisors, Inc. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Argent Advisors, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.
Argent Advisors, Inc. is a registered investment adviser registered with the Securities and Exchange Commission. Argent Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. Argent Advisors, Inc does not offer tax, legal or insurance advice. If you are a Argent Advisors, Inc. client, please remember to contact Argent Advisors, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Argent Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.


Argent Financial Group

Celebrating its 30th anniversary in 2020, Argent Financial Group (Argent) is a leading, independent, fiduciary wealth management firm. Responsible for more than $30 billion in client assets, Argent provides individuals, families, businesses and institutions with a broad range of wealth management services, including trust and estate administration, investment management, ESOPs, retirement plan consulting, funeral and cemetery trusts, charitable organization administration, oil and gas (mineral) management and other unique financial services. Headquartered in Ruston, Louisiana, Argent was formed in 1990 and traces its roots back to 1930.

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