Income Gap...
The average retired person in America will need around 70% to 80% of their working years income during retirement. For example, someone who made $50,000 may need around $40,000 in retirement. Social Security (SS) payments usually provide around 40% of the average American’s income. Those who are fortunate enough to receive a pension in addition to SS payments may have less of an income gap to fill during retirement. However, pensions are becoming less common, and do not typically replace 100% of a salary. The average pension replaces around 49% of a worker's wages.

Inflation Cash Burn
Investments can be a good way to replace income during retirement that is not provided elsewhere. For some, setting aside a portion of their income, such as the commonly recommended amount of 15%, may be enough to fill any income gaps. For many though, cash savings won’t be enough to cover the difference. Savings account interest rates may not grow savings enough over time to fill an income gap. In fact, leaving a large amount of your money in savings accounts can cause it to lose value over time, as the rate of consumer inflation is currently higher than the standard rates on savings accounts.

Real Estate, Gold, or Digital Gold?
The stock market provides an opportunity for savings to grow enough over time to fill income gaps in retirement. Though economic downturns are inevitable, the stock market can grow over time with the economy. Investing in the overall stock market can be a good way to get exposure to all sectors of the economy, including real estate. Investing in real estate through the stock market may be a good choice for many investors rather than directly purchasing actual properties, which can involve considerable time and capital.

Aesop Advisor generally recommends revenue-generating assets as investments, such as businesses that sell goods or services, and bonds issued by corporations or governments that pay interest. Revenue-generating assets have an intrinsic, fundamental value that is influenced by how much revenue the asset is expected to produce. Other types of assets that do not generate revenue, such as commodities, currencies, and collectables have values determined in different ways than stocks or bonds. Though periodic setbacks will always occur, the overall economy will likely continue to expand, regardless of what form or shape currencies and other exchanges of value take on. Stocks can give investors an opportunity to grow their money along with the overall economy so that their savings can help fill income gaps. A broad-market portfolio gives an investor exposure to all sectors of the economy. For those who may want to add a little more exposure to a certain sector, targeted investment products can provide extra portfolio allocations to any desired areas.

September 15, 2021

Markets Demystified is published the first and second Wednesdays of each month,
and is meant to help readers understand how stock market investing relates to household and personal finance.

Thanks for Reading!

Jonathon Oden
Owner | Aesop Advisor LLC

Aesop Advisor LLC newsletters are for informational purposes only. They do not attempt to predict future stock market moves and are not intended as individual investment advice. Aesop newsletters are not recommendations to buy, sell or hold any asset and are not intended as actionable investment advice or market timing. Equities references generally refer to the overall stock market, though if individual companies are mentioned, it is not a recommendation to buy, sell, or hold shares of the company. Unless otherwise indicated, terms including "stocks", the "stock market", and "market(s)" refer to Standard & Poor's 500 index. All investments involve risk and the past performance of a security or financial product does not guarantee future results or returns. While diversification may help spread risk, it does not assure a profit or protect against loss. There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing. The price of a given security may increase or decrease based on market conditions and customers may lose money, including their original investment.