Couple sitting on the beach

This week we’re continuing the conversation with ideas for advisors to help clients overcome challenges and attitudes they may have about retirement.

Jon Lagerstedt: This week we’re continuing the conversation with ideas for advisors like you to help overcome challenges and attitudes that your clients may have about retirement. I’m Jon Lagerstedt.

Todd Crawley: And I’m Todd Crawley.

Jon: And this is The Essential Practice. We started this conversation in program 225 talking about a retirement survey Well Fargo commissioned to learn about attitudes clients have about retirement—a lot of great findings within that piece, so we’d encourage our audience to listen to that program. Todd, you’d suggested something advisors might consider, and that’s offering to consult with clients’ children and/or grandchildren on their 401(k)s.

Calendar with the word retirement written on it

A Wells Fargo study identifies attitudes about retirement—we discuss the results of the study and ideas for advisors to help clients overcome the challenges they face.

Jon Lagerstedt: In this first of a two-part conversation, we’re discussing the results of a Wells Fargo survey and study on attitudes investors have about their retirement. I’m Jon Lagerstedt.

Todd Crawley: And I’m Todd Crawley.

Jon: And this is The Essential Practice. Welcome to the summer of 2016, Todd!

081016-Chan-Chart-1

Today we have a guest post from Christian Chan, CFA, and Kandarp Acharya, CFA, FRM, portfolio managers of the Wells Fargo Dynamic Target Date Funds.

When it comes to saving for retirement, the word average gains a much more positive connotation than it has in life.

The topic brings to mind A Prairie Home Companion’s fictional town of Lake Wobegon, where all the children are above average. As a kid from the suburbs, I have spent the majority of my life trying to escape the average. I studied hard (or at least I studied harder than average), I graduated from a good university (it was an above-average university), and then I dutifully joined the workforce, where I now, like everyone else, work harder than the average working American (don’t we all, on average?). But try as I might, I just can’t seem to escape the average. For example, I am below average in height and above average in weight, so that makes me pretty average, right? While this hasn’t done much for my growing midlife angst, the average experience for the American worker, or more precisely the median experience, is an excellent place to start when you’re designing your retirement investment strategy.

The stock market's range of returns over various time horizons

Today we have a guest post from Christian Chan, CFA, and Kandarp Acharya, CFA, FRM, portfolio managers of the Wells Fargo Dynamic Target Date Funds.

Few things cause investors more anxiety than saving for retirement. It’s easy to see why. According to CNNMoney’s retirement calculator, I need $940k to retire. Meanwhile, two financial companies’ retirement calculators say I need $1.4 million and $1.6 million. And last week, I read an article quoting members of Congress who’ve found that the Consumer Financial Protection Bureau’s retirement calculator “always displays the wrong amount” because of a coding error. Even in our line of work, target date funds, which are intended to simplify retirement investing, offer drastically different solutions to essentially the same problem. Over a series of blog posts, we’ll try to demystify the topic of retirement savings and provide some insight into how we think about investing for retirement.

At its core, the retirement investing equation is pretty simple. Investors (myself included) typically have some sort of retirement savings plan, such as a 401(k), to which we make monthly contributions. The plan invests our money into some combination of stocks, bonds, and cash vehicles. And after 40 years, or whatever your time horizon might be, the idea is to build a nest egg that allows the retirement we’ve always dreamed of. For some, that dream is having enough money to live comfortably, go on trips with family, perhaps start a second career, or spend a little bit on themselves—perhaps on a vacation to a tropical island somewhere, sipping pina coladas. Others may dream of spending all of their golden years on that tropical island.