Retirement News
Spring 2017
Make Your
Money Work
Harder.
Refresh Your Retirement Strategy
Fewer than half of all investors have tried to calculate how
much money they’ll need in retirement. However, those
who have taken the time to do so are more confident about
their prospects.
If you’re currently investing in your
employer’s retirement plan, then you
recognize the value of putting money
aside for your future. That’s a great start,
but are you investing enough? Do you
know how much you’ll need?
Set Specific Retirement Goals
What would you like your retirement to
look like? The answer will impact how
much you need to invest. By setting
specific goals, you’ll have a better idea
of what it will take to retire in the way that
you’d like and you’ll be able to move
forward more confidently.
Try Our Planning Calculator
Using an online calculator can be a great
way to check your progress as you invest
for retirement. To get an idea of how close
you are to meeting your goals, go to
americanfundsretirement.com. Click on
Calculators & Learning Tools and select
the Retirement Planning Calculator.
Just enter a few factors — starting amount,
number of years to invest, additional
contributions and hypothetical rate of
return — and see how regular investing
can pay off over time. You can also assess
continued on page 2
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any
other entity, so they may lose value.
(continued)
Refresh Your Retirement Strategy
whether you’re on track or need to make
adjustments to improve your outlook.
Consider Increasing Contributions
How do your estimated withdrawals
compare with your desired income in
retirement? If it’s less, don’t be discouraged.
You can set short-term investment goals
to close the gap over time. Gradually
increasing your contributions can make it
easier to pursue your long-term retirement
goal. Look at the table below to see how
small increases in your contributions can
make a meaningful difference.
Meet With Your Plan’s Financial
Professional
can evaluate your personal situation
objectively and help you set realistic
financial goals. In addition, your plan’s
financial professional can assess your
progress periodically or fine-tune your
investment mix over time as you get closer
to your goal.
Planning for retirement can feel
overwhelming at times. Many don’t feel
comfortable or don’t have the time to put
together their own investment mix.
Fortunately, you don’t have to go it alone.
Your retirement plan’s financial professional
Try Our Online Retirement Calculator
Review Your Investment Allocations
In addition to how much you’re saving, it’s
a good idea to review your investment
allocations at least once a year. Are your
investments aligned with your retirement
goals? If not, you may want to adjust your
investment mix.
If you’re happy with your investment
strategy, you may want to make sure
your original allocations remain the same.
Consider rebalancing your portfolio when
your fund allocations have changed more
than 5% to 10%. Rebalancing helps keep
your mix of investments on track toward
meeting your financial goals.
Estimated Monthly Retirement Withdrawals*
Read across the rows to find estimated monthly retirement plan withdrawals based on
the number of years invested and the monthly contribution.
Number of Years Invested
Monthly
Investment
10 Years
20 Years
30 Years
40 Years
$100/mo
$61
$198
$500
$1,171
$200/mo
$123
$395
$1,000
$2,343
$300/mo
$184
$593
$1,500
$3,514
$400/mo
$246
$791
$2,000
$4,686
*Hypothetical examples assume an 8% average annual return compounded monthly and an annual withdrawal rate of 4% after the accumulation period
indicated. These are point-in-time views and as such do not take into account any growth or loss during retirement. Without investment growth/loss
during retirement, a 4% annual withdrawal rate would deplete retirement savings in 25 years. Examples are for illustrative purposes only and do not
reflect the results of any particular investment, which will fluctuate with market conditions, or taxes that may be owed on tax-deferred contributions,
including the 10% penalty for withdrawals taken before age 59½. Regular investing does not ensure a profit or protect against loss in a declining market.
2 | Retirement News | Spring 2017
Give Yourself a Raise
Many financial experts recommend that you save about 10% to
15% of your annual income for retirement. However, a recent
study found that the average U.S. employee is saving just 6.8%.1
If you recently received a raise, consider adding a percentage of
your salary increase to your retirement account to close the gap.
Gradually increasing your contributions by 1% per year until
you reach 10% to 15% of your pay can make a big difference
in your monthly withdrawals at retirement.
The Value of Increasing Contributions Over Time2
Set it and forget it
Set it and increase it
• Start: 4% of pay
• Start: 4% of pay
• Strategy: Save the same
• Strategy: Increase your
That’s
$3,137
more
For example, if you started contributing 4% annually to your
retirement plan and increased your contribution until it reached
12%, your monthly retirement withdrawals would be more than
twice as much as someone who didn’t change their contribution
percentage (see right).
1 PSCA’s
contribution percentage
by 1% each year until it
reaches 12%
percentage of pay until
retirement
per month
Retirement
withdrawals
$5,234
per month
Retirement
withdrawals
$2,097
per month
59th Annual Survey of Profit Sharing and 401(k) Plans, 2016
2These
examples assume a starting salary of $43,000, a 2% annual pay
increase, a 40-year accumulation period and 25 years of withdrawals.
See footnote on page 2 for more hypothetical assumptions.
Saving vs. Investing for Retirement
The Value of a Return Over 40 Years
Saving
Saving
$1,000
a month
and not
earning
a return
vs. Investing
Investing
$250
a month
and earning
an 8% return
$2,909
monthly
retirement
withdrawals
$1,600
monthly
retirement
withdrawals
3
You are
contributing
$750 less
per month
and earning
$1,309 more
per month when
you retire
A recent study found that 80% of respondents who don’t feel
confident about retirement say the No. 1 reason is that they
haven’t saved enough money.4 However, saving for retirement
requires more than just contributing to your plan. Without
good investment returns, it can be difficult to accumulate
enough money for retirement.
Some who are concerned about market volatility may try
to “save” their way to retirement without investing. But by
investing with a long-term perspective, you can benefit
from growth potential and compounded earnings, which
is when the dividends on your investments produce
additional earnings.
For example, you can potentially contribute less and have
more assets for retirement by investing rather than putting
your money in a bank savings account. If you invest $250 a
month, your monthly retirement withdrawals would be nearly
twice as much as someone who simply saved $1,000 a month.
3These
examples assume a 40-year accumulation period and 25
years of withdrawals. See footnote on page 2 for more hypothetical
assumptions.
4 State
Street Global Advisors Retirement Survey, 2015
Retirement News | Spring 2017 | 3
Investing in Volatile Markets
Did You Know ...
A recent study reported that during the
20-year period ending 12/31/15, the
annualized returns for the average equity
investor lagged those of the unmanaged
Standard & Poor’s 500 Composite Index
by more than 3% per year.
80%
of retirement savers who don’t feel
confident about retirement say the
primary reason is that they haven’t
saved enough.1
48%
One reason for this is that many investors
try to “time” the market, which can actually
hurt their results. Buying low and selling
high is easier said than done. It’s better to
focus on contributing on a regular basis.
In the hypothetical example below,
because you purchase more shares when
prices are low than when they’re high, you
end up with an average purchase price
below the average share price for the four
investment dates.
Of course, you have to stick with your
strategy during bad markets as well as
good ones to reap the benefits of regular
investing.
6.8%
of their annual income is the average
amount a U.S. employee is saving for
retirement.3
State Street Global Advisors Retirement
Survey, 2015
1
2016 Retirement Confidence Survey,
Employee Benefit Research Institute and
Mathew Greenwald & Associates
2
PSCA’s 59th Annual Survey of Profit Sharing
and 401(k) Plans, 2016
3
The Dollar Cost Averaging Way
Date of Investment
Amount Invested
Share Price
Number of Shares
Purchased
January 15
$150
$25
6.0
January 31
$150
$20
7.5
February 15
$150
$10
15.0
February 28
$150
$20
7.5
Totals
$600
$75
36.0 shares
Average share price
$18.75
($75 ÷ 4 investments)
Average price paid per share
$16.67
($600 ÷ 36.0 shares)
This example is hypothetical and does not reflect the share price of any particular investment.
Regular investing does not ensure a profit or protect against loss, and you should consider your
willingness to keep investing when share prices are declining.
Retirement News is published by
American Funds, one of the oldest and
largest fund families in the U.S. Since
1931, we’ve managed our funds with a
long-term focus based on thorough
research and attention to risk.
This newsletter is for use by retirement
plan partici­pants and with all variations
of policy form number 28276.
Investors should carefully consider
investment objectives, risks, charges
and expenses. This and other important
information is contained in the fund
prospectuses and summary
prospectuses, which can be obtained
from a financial professional and should
be read carefully before investing.
Printed on recycled paper 00171087
A program of regular investing can help
take the emotion out of investing when
markets turn particularly volatile because
your long-term strategy doesn’t change.
While regular investing does not ensure
a profit or protect against loss, dollar
cost averaging can help you weather
market declines.
Lit. No. RPGEFL-013-0217P Litho in USA CGD/RRD/8104-S54381 © 2017 American Funds Distributors, Inc.
Through a process called dollar cost
averaging, an investor contributes the
same amount at regular intervals — for
example, $300 each month — regardless
of whether stock prices rise or fall. As a
result, investors can have a lower average
price per share.
of workers report they have tried to
calculate how much money they will
need so that they can live comfortably
in retirement.2