Connect with us

Infographics

A Visual Guide to Planning for Retirement

Published

on

This infographic is available as a poster.

NYL Retirement Planning

This infographic is available as a poster.

How Retirement Planning Today, Can Ensure Freedom and Stability Tomorrow

When it comes to retirement planning, millions of Americans across different generations are finding it difficult to feel secure.

This is evidenced by the fact that only 54% of Baby Boomers have a retirement strategy in place. For younger generations such as Millennials, this falls to as low as 31%.

Thankfully, it’s never too late to start thinking about retirement. In this infographic from New York Life Investments, we’ve put together a straightforward overview that covers the various aspects of the retirement planning process.

How Much Should You Save?

Although this is one of the most frequently asked questions, it doesn’t come with an easy answer. That’s because retirement planning isn’t just about dollars saved, it’s also about income.

The following table lists a number of factors that could affect the level of retirement income you might need:

FactorDescription
LifestyleYour desired lifestyle will have a large impact on your required level of income.
Hobbies, vacations, and other pursuits can be a significant expense.
Housing needsRetirees often find themselves needing less space.
Selling your home and downsizing is a common method for increasing cash flows.
Medical needsMedical expenses can arise unexpectedly and be a large drain on savings.
The average American aged 65+ spends roughly $11,000 a year on medical needs.*
InflationInflation can erode the purchasing power of your retirement income, and highlights
the importance of picking the right investments to counter this effect.

*Source: U.S. Department of Health

After estimating your retirement income, the next step is figuring out how to achieve it. Here’s how a savings plan might look, based on two assumptions: (i) your retirement income is equal to 70% of your current annual income, and (ii) you are able to generate an annual return of 7%.

Annual salaryAnnual retirement incomeRequired savingsMonthly contributions
(20 years until retirement)
Monthly contributions
(25 years until retirement)
Monthly contributions
(30 years until retirement)
$50,000$35,000$777,778$1,480$955$635
$75,000$52,500$1,166,667$2,230$1,435$955
$100,000$77,000$1,711,111$3,270$2,100$1,395

The key takeaway from this table is that the earlier you start saving for retirement, the lower your monthly burden will be.

It’s also important to remember that the 70% retirement income goal was simply used as a benchmark—your own retirement strategy will ultimately be guided by your unique needs.

The Importance of Financial Assets

In the previous example, our second assumption was that you were able to earn an annual return of 7%. Achieving this typically requires the use of financial assets like stocks and bonds, which have the potential to grow your wealth much faster than a typical savings account.

For example, as at March 15, 2021, the national average interest rate offered by a savings account was 0.04%. Compare this to the S&P 500, which has generated an average annualized return of 13.9% between 2011 and 2020. The S&P 500 is a stock market index that consists of the 500 largest publicly-traded U.S. corporations.

Issues become apparent when we take a closer look at who actually owns stocks.

U.S. Families by WealthPercentage of Families with Equity Exposure
Top 10%90%
Middle 50-90%70%
Bottom 50%31%

Source: Federal Reserve

With only 31% of families in the bottom 50% having exposure to stocks, many Americans are missing out on a powerful tool for growing their wealth. This highlights the importance of investor education, particularly when thinking about retirement.

Retirement Planning Accounts

Retirement accounts are another important tool that many Americans are not using to their advantage. For example, just 50.5% of Americans own a retirement account, while 98.2% own transaction accounts (checking or savings).

Here’s a simple overview of two retirement accounts that most Americans have access to.

Traditional IRA

A traditional IRA (Individual Retirement Account) provides tax benefits to help you prepare for retirement. It can be opened online or in-person through various banks, brokerage firms, wealth managers, or trading platforms.

Contributions to this account may reduce your taxable income for that given year, but these assets will be locked until retirement. Once retired, any untaxed income would be taxed upon withdrawal, ideally when you are in a lower marginal tax bracket.

Traditional 401(k)

A traditional 401(k) is typically offered through your employer and offers similar tax benefits as an IRA. Contributions into a traditional 401(k) reduce your taxable income, but in this case, they are automatically taken from your payroll.

An added benefit of the 401(k) is that your employer will usually match some or all of the contributions you make.

Roth IRA and Roth 401(k)

The Roth variants of these accounts follow a similar concept as their “traditional” counterparts, but flipped around. This means that contributions are taxed, while withdrawals are tax-free.

Ultimately, the decision to use either a Roth or traditional account will depend on your financial position, and can be a great topic to discuss with a professional advisor.

Feeling Secure

While everyone has different goals for retirement, the need for financial security is shared by all.

It’s been estimated, however, that the average American has a retirement savings shortfall of nearly 10 years. Also known as longevity risk, this dilemma refers to the scenario where retirement savings and income are unable to support you for the rest of your life.

With this in mind, it’s never too late to take control of your future and put a plan into place.

Advisor channel footer

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading
Comments

Infographics

Visualized: Three Investment Opportunities for the Future

Here are three investment opportunities to consider as the U.S. government proposes a record $6 trillion in budget initiatives.

Published

on

Investment Opportunities

This infographic is available as a poster.

Visualized: Three Investment Opportunities for the Future

With proposed government spending initiatives set to reach $6 trillion, the U.S. could be entering a new era of economic potential.

Sweeping measures have been proposed to support the economy—reaching levels of sustained spending not seen since WWII. These include a $2.3 trillion American Jobs Plan and a $1.9 trillion American Rescue Plan.

But how will this affect financial markets, and what investment opportunities does this present? As we look ahead, this infographic from New York Life Investments explores three potential areas of growth.

Three Investment Opportunities

Here are key trends that could shape the future—creating new opportunities for investors—as government spending increases:

1. The Strategic Role of Debt

In 2021, corporate debt sits at roughly 50% of U.S. GDP.

Importantly, COVID-19 relief packages helped offset a wave of defaults. Yet at the same time, a record $1.7 trillion in corporate debt was issued by nonfinancial companies in 2020—$600 billion higher than the previous peak. This rise in debt may offer potential investment opportunities.

In a low-interest rate environment, debt is relatively less expensive for companies to hold than during periods of high interest rates. This means they can invest in their business, make acquisitions, and gain greater market share.

Companies with investment-grade debt, which have stronger ratings from credit agencies, will likely be better positioned to make strategic business moves and mitigate the potential of future default.

2. Digital Infrastructure

There are several core components that underpin technology today:

Semiconductor chips: Key components in electronics such as smartphones, computers, refrigerators, and cars. As electronics proliferate, semiconductor companies may provide windows of opportunity. By 2030, electronics are projected to make up 45% of a car’s cost, up from 18% in 2000.

Broadband: Infrastructure required for internet access, including in rural and remote areas. Across OECD countries, broadband subscriptions per 100 people is just 33.3, illustrating a gap in access to high-speed internet. 5G, fiber optic cable, and internet infrastructure companies could offer the essentials that are needed.

Hyperscale cloud providers: Enable vast amounts of data and computing power to operate on cloud-based platforms, often in real time. With average gross margins of 57% and net debt to equity of 4%, cloud computing vendors could be poised for growth as data expands exponentially.

3. Emerging Markets’ Growing Middle Class

In the last two decades, emerging market (EM) income per capita has doubled. As disposable incomes rise, the consumer landscape is shifting towards more sustainable products.

Willingness to Pay a Premium for the Following Attributes% of Respondents
Contains organic/all-natural ingredients41%
Contains environmentally friendly/sustainable materials38%
Offers/does something no other product on the market provides37%
Delivers on social responsibility claims30%

Source: Conference Board Global Consumer Confidence Survey conducted with Nielsen. Data as at June, 2020.

Notably, the plant-based meat market in Asia is projected to grow 15.9% annually by 2026. In fact, global consumer searches for sustainable products have grown 71% since 2016.

Forces of Change

At this critical juncture in spending lies new investment opportunities. While it’s impossible to predict the future, strong underlying trends provide clues for how investors can think about positioning their portfolio.

Advisor channel footer

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading

Infographics

The 5 Fastest Growing Industries of the Next Decade

We reveal the five fastest growing industries of the future, within broader sectors such as healthcare and technology. Which industry will be number one?

Published

on

Fastest Growing Industries

This infographic is available as a poster.

The Fastest Growing Industries of the Future

Today, the U.S. economy looks very different than it did hundreds of ago. While railroad stocks dominated in the 19th century, industries within technology and healthcare have grown substantially in recent years. As dynamics continue to shift, what will be the fastest growing industries of the future?

In this infographic from New York Life Investments, we uncover the industries projected to see the fastest growth rates over the next decade.

What Are the Fastest Growing Industries?

The U.S. economy is growing. From 2019 to 2029, total industry output is expected to rise by more than 20%.

Output is the value of final goods and services, as well as intermediary sales that are not typically included in GDP. In this case, output is based on chained 2012 dollars, which is a method of adjusting real dollar amounts for inflation over time using 2012 as a base year.

Below, we count down the fastest growing industries from 2019 to 2029, according to projections from the U.S. Bureau of Labor Statistics.

#5: Outpatient Care Centers

This industry is defined as facilities where the patient is not required to stay overnight, such as:

  • Mental health and substance abuse centers
  • Family planning clinics
  • Dialysis clinics
  • Multidisciplinary clinics

As patients demand more convenient and less expensive care, the popularity of outpatient care centers has grown. Advances in medical technology, such as minimally invasive surgeries, also allow for same day release. Here is what projected growth looks like for the industry.

Compound Annual Growth Rate3.2%
2019 Output$122B
2029 Output$168B

However, investors may want to consider that health care leaders say implementing information technology (IT) is their greatest challenge.

#4: Computer System Design & Related Services

Companies that primarily provide IT expertise fall within this industry. Here are some examples:

  • IT consultants
  • Programming services
  • Video design
  • Web page development
    • The growth of e-commerce and digital marketing will likely contribute to the industry’s success. For instance, U.S. e-commerce climbed by 32% in 2020. Buoyed by these trends, computer systems design companies are expected to have a compound annual growth rate exceeding 3%.

      Compound Annual Growth Rate3.2%
      2019 Output$518B
      2029 Output$712B

      On the other hand, investors may want to watch for the high capital costs some IT companies could incur to upgrade outdated platforms.

      #3: Oil & Gas Extraction

      This industry includes companies involved in the preparation of oil & gas, up to the point of shipment from the producing property. Some examples are:

      • Integrated oil & gas companies
      • Drilling contractors
      • Exploration & production companies

      As inflation rises, extraction companies may benefit from higher prices and wider profit margins. The industry is expected to have the third highest growth rate over the next decade.

      Compound Annual Growth Rate3.4%
      2019 Output$474B
      2029 Output$660B

      However, investors may want to consider the growing traction of sustainable investments. While oil demand isn’t projected to peak until 2035, the shift to clean energy may cause long-term challenges for the industry.

      #2: Information Services

      Businesses that supply, search for, or publish information fall within this industry. Some examples are:

      • News syndicates
      • Internet publishing
      • Broadcasting
      • Web search portals

      Consumption of trusted news brands is growing, and paid subscriptions are increasing in richer Western countries. In addition, Google has committed at least $1 billion to license content from publishers for its News Showcase product. Here’s what potential growth looks like for information services companies.

      Compound Annual Growth Rate4.2%
      2019 Output$243B
      2029 Output$365B

      On the other hand, ad revenue is falling in some segments. Investors researching this industry may want to consider platforms that are diversifying their revenue streams.

      #1: Software Publishers

      Topping the list of the fastest growing industries is companies that design, install, and provide post-purchase support for software. Some examples are:

      • Cybersecurity
      • Graphic design
      • Operating systems
      • Customer relationship management

      Amid remote work and e-commerce growth, software enables companies to connect with employees and customers. The industry is projected to have a compound annual growth rate of almost 5% from 2019 to 2029.

      Compound Annual Growth Rate4.8%
      2019 Output$236B
      2029 Output$378B

      At the same time, the industry has relatively low barriers to entry. Investors may want to watch for competitors, which can pop up anytime and threaten existing companies’ market share.

      Industries of the Future

      Investors with a long-term view can consider investments in these high potential areas. Propelled by market trends, the fastest growing industries fall within three broader sectors:

      By looking to the future, investors may be able to capitalize on industries poised for growth.

      Advisor channel footer

      Thank you!
      Given email address is already subscribed, thank you!
      Please provide a valid email address.
      Please complete the CAPTCHA.
      Oops. Something went wrong. Please try again later.

Continue Reading
New York Life Investments

Subscribe

Are you a financial advisor?

Subscribe here to get every update, including when new charts or infographics go live:

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Popular