[bumby]

Out of curiosity, what timeframe were your working years? My concern is that "investing mostly in equities" (assuming a decent percent of growth stocks) can be the deciding factor if you happen to hit a good bull run but potentially disastrous if your market timing is off.

[pc86]

Time in the market >>> timing the market.

Even the absolute worst luck gives you perfectly acceptable returns on 30-35 year timelines. Multiple orders of magnitude better than a savings account, for sure.

Time and time again the best approach for highly compensated people who don't want to actively manage their finances is to put a chunk of every paycheck into a broadly diversified range of index funds and forget that it exists. In the US this means a) getting your company 401(k) match no matter what; b) putting the rest into a Roth IRA as cash flow/debt service allows; c) putting the rest into the remainder of your 401(k) as cash flow/debt service allows; d) putting the rest into a non-tax-advantaged brokerage account that basically mimics your 401(k) but probably has better fund options.

[bumby]

Except we mere mortal humans have the added constraint of limited time.

Meaning if you were planning on retiring during one of the long sideways or downturns your required "time in the market" may have just been extended by a decade. The impact of that depends on the unique time constraints of the individual and how well they addressed risk exposure.

Add to that, most economists don't think the long-term market returns will approach the past returns. Most now think 6% is reasonable, when the past was 10%-12%. This extends the horizon further unless you are willing to increase risk exposure by selecting higher growth stocks.

[pc86]

Future returns could certainly be less. But all we have to go on is what's happened so far. In the past even the worst entry+exit points are acceptable for retirement if not astounding, if you've saved something like 15% of your income for age 30-65 (I forget the exact numbers but that's more-or-less close to it). Yes, some people have to choose between cutting their standard of living and retiring on time, and retiring later for the expected standard of living. I'm not sure what we can do to change that? Like you said, we have limited time and everyone's situation is different. Go onto any of those retirement income calculators and compare the person who starts saving in their mid-30's but maxes everything out to the person who starts saving with their first job out of school and gradually increases from $100 or $200/mo.

Your comment was that equity investing can be disastrous if you hit the timeline wrong, and my only point was that unless you're speculating or are only in the market for 5-10 years, that has never happened. We have no way of knowing if that will happen in the future or not, but there's no reason to believe that we're going to see decades of middling or negative growth. There's really no other option if you want to have a real retirement unless you plan to just rely on whatever government assistance you can get.

[bumby]

Your point is well taken on future returns and how starting the compound interest cycle is a major contributor to success.

>that has never happened

This is the part that I disagree with. Talk with anyone who planned on retiring around 2008-ish. As a hypothetical, if the market is the proxy measure they lost around 5-8 years of retirement because they had to have "more time in the market" to re-coup losses. If they actually retired and were drawing down their money, it's even worse. Granted, the hypothetical is biased because someone of retirement age shouldn't have that much market exposure, but the point still stands that, while true at the population level, waiting for the market to recover doesn't always work out well at the individual level. I tend to think the people who tout long-term averages of market returns tend to ignore the long periods of sideways or downward movement that may align with an individual's specific circumstances.

[pc86]

You make a good point that I tried to address but didn't do so very eloquently. My "never happened" was to a sustained period (12, 15+ years) of returns where your contributions weren't worth much more than they were when you put them in. That would destroy an entire generation's retirement. Your point about losing 5-8 years in your goal was to retire in 2008 is well taken. Folks in that position, assuming they had massive market exposure (which like you said is a mistake and extremely risky), had to either take a standard-of-living cut in retirement, continue working, or draw down principle and risk running out of money early.

[joshribakoff]

Statistically the best way to max returns is going all in as early as possible, not trickling money in with a DRIP/DCA