401(k) in Focus · down—1% percent equals $10 for every $1,000 of your check. And if 1% still feels like too much, check your plan to see if you can increase your contribution rate

401(k) in Focus

In this issue

November 2016

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401(k) SOLUTIONS

The 1% Difference––Small Steps to Big Savings

Quarterly Market Update from Fisher’s Investment Policy Committee

FAQ Check––How Can I Make My Savings Work Harder For Me?

2 NOVEMBER 2016

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401(k) SOLUTIONS

The 1% Difference—Small Steps to Big Savings

Many of us dream of enjoying retirement, but did you

know your future financial success may hinge on how

much you contribute to your 401(k) during your working

years? Even if you’re already contributing, many experts

say you may not be contributing enough and suggest

setting aside at least 10 to 15% of your current pay for

your future needs.¹

Saving 10 to 15% may sound impossible, but that number

becomes more achievable by making small, regular

increases to your contribution amount combined with the

power of compounding. And you only need to commit

an additional 1% of your pay each year to help make that

goal a reality.

Step 1—Your Contributions

Making your monthly 401(k) contribution is one of the

single most important things you can do to achieve

a comfortable retirement. Steadily increasing your

contribution by 1% improves your chances of creating the

retirement you want in a kinder, gentler, less invasive way.

What does an extra 1% really mean to your future? Let’s

assume you are 30 years old, will retire at 65, will earn

$50,000 per year for the rest of your career, and that your

account earns 7% interest annually.

If you contribute 3%:

Your balance at age 65 = $207,335

If you contribute 4%:

Your balance at age 65 = $276,473

That 1% difference means an additional $69,138 of

retirement savings. And that huge increase in retirement

income happened by contributing an extra $9.62 per

week (or $500 per year).

Let’s take the same scenario one step further: What would

1% mean to your actual monthly retirement income?

Assuming you’ll live to 85 and will continue earning a 7%

rate of return on your retirement savings:²

If you contribute 3%:

Your retirement income would = $1,336/month

If you contribute 4%:

Your retirement income would = $1,782/month

That’s nearly $446 more in your pocket every month for

20 years just by investing an additional 1% of your pay

today.

Step 2—The Power of Compounding

That little 1% can add up quickly due to the power of

compounding. Compounding happens when you begin

3NOVEMBER 2016

to earn money on the investment income you’ve already

earned. Say you invest $1,000 in an account that earns

5% interest. Without compounding interest, your account

would earn $50 each year. After 10 years, your account

would be worth $1,500.³

But with compounding, your savings grows faster because

you earn interest on the money you’ve contributed as

well as on the interest it earns. In this scenario, the same

account grows to $1,050 the first year due to interest. In

year two, you’ll earn 5% interest on the previous years’

earnings of $1,050, meaning your account will grow

by $52.50 in interest instead of $50. As this process

continues, your account picks up steam, growing faster

and faster as the years go by. Under these conditions,

around year 10, your account would be worth $1,628.89

due to compounding, instead of the $1,500 it would have

been worth without compounding. When you add in your

additional monthly 401(k) contributions, you can see how

the power of compounding can help your account grow

rapidly.

Still think setting aside 10 to 15% of your pay seems like a

lot? Here are a few more benefits to consider:

• Your traditional 401(k) contributions are tax-deferred,

meaning you don’t pay taxes on your 401(k) until you

withdraw the money (up to certain limits)

• Contributing to your 401(k) reduces your current

taxable income and can even make you eligible for

certain tax credits

• If your company offers a match, the 10 to 15% suggested

contribution will not take as much effort to achieve

Saving for your future is important, and chances are,

reducing your monthly budget by a few dollars now will

hurt much less than living on a substantially reduced

income in your elderly years.

Helpful Ways to Achieve a 1% Increase

Of course, it’s one thing to understand the importance of

saving more, and another to actually make it happen. But

maybe you are wondering where you’ll find the money to

fund that 1% increase? Here are a few suggestions to help

you make adding 1% a reality:

Bump up your contribution rate when you get a raise.

When you get a raise of, say, 2%, make the choice to

immediately put half of it (1%) into the 401(k) plan. That

way, you’ll still receive the benefit of a raise, and you’ll

also have the comfort of knowing you’re gaining ground

on your retirement goals.

Shop around for the services you use.

When was the last time you shopped for quotes for your

car insurance, cell phone or cable service? Make a point

to price check and value shop these types of services

every year or two, and put the money you save back into

your 401(k).

Regularly re-evaluate your spending priorities.

Over time, your priorities change. Clothing costs and

a night out on the town may give way to diapers, a

mortgage, and saving for college. Be sure your spending

habits reflect your changing priorities; otherwise, you’ll

end up spending your dollars on things you don’t value

instead of devoting them to where you want or need

them to go.

As we’ve seen, when it comes to your retirement savings,

1% can make a huge difference. If you are ready to

increase your retirement contribution by 1% or more, or

have questions about the power of compounding, talk to

your Fisher 401(k) Solutions retirement specialist today.

We’re here to help.

¹Mercado, Darla. “Retirement Readiness: 15% Salary Deferrals Are the New 10% for 401(k)s.” Investment News, Jan. 5, 2015. Web.²Fisher Investments Research.³401(k) accounts are not guaranteed. Your account may even lose money, depending upon the investments you choose.

4 NOVEMBER 2016

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401(k) SOLUTIONS

Quarterly Market Update from Fisher’s Investment Policy Committee

Global markets rose in Q3, shrugging off Brexit and other

political theatrics to finish the quarter up 4.9%.¹ We dubbed

this “The Year of Falling Uncertainty,” and it’s living up to

its name. More clarity comes in Q4 and beyond—and with

it, we expect the bull market to grind higher.

Much of the uncertainty fog that shrouded markets earlier

this year has cleared. Brexit doom-mongering lost all

credibility as UK stocks soared post-referendum and most

economic data rose. Chinese markets calmed and the

economy remained steady. Most U.S. indicators defied

recession fears. Oil prices stabilized. Earnings expectations

improved as analysts anticipated better times in the oil

patch on top of non-Energy earnings’ overlooked strength.

Uncertainty should lift further from here. After November

8th, we’ll know the next president and Congress’s makeup.

Cabinet appointments will emerge over the following

weeks. Spain and Italy hold key votes later in the quarter,

clarifying their prime ministers’ futures. At some point

the Fed will hike rates again, ending the waiting game

and giving investors another chance to realize minor rate

moves are benign.

While fundamental drivers point positively, this may be

history’s most joyless bull market. Eight years into the

1990s bull, cheerful optimism abounded, consistent with

Sir John Templeton’s oft-quoted truism: “Bull markets

are born on pessimism, grow on skepticism, mature on

optimism and die on euphoria.” Now, in this bull’s eighth

year, it’s like a gear was stripped. We’re stuck in skepticism,

grinding away. This has lengthened the bull market, but

also weighed on returns.

A longer, less ebullient bull market is still healthy and a

wonderful time to own stocks. Moreover, flattish stretches

like the present aren’t self-perpetuating. Stocks can break

out at any time and have done so historically. Yet many

investors have trouble staying patient and awaiting better

days. People recall the late 1990s’ eye-popping returns

and want more—seeking out the hottest-performing

category and shooting themselves in the foot. We see

investors getting antsy, projecting the recent past into the

future, a behavioral trap called recency bias. Today, this

is luring some investors to assets or sectors with bigger

recent returns. But basing expectations for future returns

on the past is always an error. When most investors become

convinced of something, markets typically surprise.

Sector-specific returns show recency bias’ risks. Sour

sentiment benefited the typically defensive Utilities,

Telecom, and Consumer Staples sectors during early

2016’s volatility, generating year-to-date out-performance.

But their upturn was brief, and all three fell in Q3 while

5NOVEMBER 2016

broad markets rose. Energy similarly enjoyed a bounce in

Q1 and early Q2, but resumed lagging as the reality of

an oversupplied oil market reasserted itself. Meanwhile,

former laggards Financials, Tech and Consumer

Discretionary led in Q3, rewarding those

who stuck with them earlier this year.

Investors’ biggest test in Q4 will

likely be politics. Never before

have two such unpopular

major-party nominees faced

off. Normally, markets believe

candidates’ campaign pledges,

viewing Democrats as anti-business

and Republicans as market-friendly.

This keeps election-year returns mild

when Democrats win and usually boosts

them when Republicans win. In the inaugural

year, it flips as the winner does less than hoped or

feared. This election, markets fear Republican Trump as

much as Democrat Clinton. Many believe his anti-trade

rhetoric is economically dangerous. No Fortune 100

CEO has endorsed his campaign. The lack of a perceived

market-friendly candidate likely means milder returns this

year, while positioning politics as a positive next year.

As always, we’ll unveil our formal 2017 forecast at the

year’s outset. At present, however, we’re bullish and see

no reason for this to change soon. Most Leading Economic

Indexes are still high and rising. Yield curves have flattened

somewhat but remain positively sloped, keeping bank

lending profitable. Broad money supply (M4) is growing

steadily, fueling the economic engine. Monetary policy

remains wrongheaded throughout Europe and Japan, but

stocks have dealt with this for years. Quiet IPO markets,

among other indicators, show the euphoria typifying

market tops is absent. Risks always exist, but we see

none big, bad, or overlooked enough to end the bull

prematurely. Corrections are always possible, for any or

no reason, but we don’t believe a bear market is likely to

form soon.

Worries might dominate the headlines,

but this is normal for a bull market—

the “Wall of Worry” is a cliché for

a reason. The steep post-Brexit

recovery shows the danger of

falling for fearful narratives.

Remember this as you read doom-

and-gloom warnings about rate

hikes, Trump, Clinton and all the

rest. The real time to worry is when

no one else does. Today is a time for

patient optimism.

If you would like to learn more about the stock

market, have any questions, or need assistance with your

401(k), we encourage you to contact your company’s Fisher

Retirement Counselor or call the Fisher 401(k) Solutions

Help Desk at 888-322-7586.

-The Investment Policy Committee

“Bull markets are born on

pessimism, grow on skepticism, mature on optimism, and die on

euphoria.”-Sir John

Templeton

1FactSet, as of 10/03/2016. MSCI World Index return with net dividends, 06/30/2016 – 09/30/2016. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses a Luxembourg tax basis.

6 NOVEMBER 2016

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401(k) SOLUTIONS

FAQ Check—Ask a Retirement Counselor I have some money in my bank savings account earning next to nothing. How can I make my savings work harder for me?

Low interest rates have been a way of life for several years

now. There was a time when a humble savings account

could pay 5% or more! Unfortunately, those times are

now long gone—interest rates have hovered around 1%

or less for years. While these historically low rates won’t

last forever, it can be frustrating to watch your hard-earned

money hibernate in a bank account.

We want to help you avoid the common problems many

savers fall into when trying to get better returns on their

savings. First, it’s important to establish the purpose of

these funds. Then, once your intentions are clear, you can

choose how to best invest this money for your future.

Emergency FundsIs your savings earmarked for life’s unexpected

emergencies? Most experts agree—a healthy emergency

fund consists of at least three months’ worth of your income.

Be sure your emergency cash stash is parked somewhere

that’s easily accessible, FDIC insured, and doesn’t run the

risk of losing value. Then check out www.bankrate.com

to compare rates on federally insured bank accounts. It’s

a great resource, and could help you grow your savings

faster, and safely.

Your 401(k)If you find you have a little extra money at the end of each

month, consider upping your 401(k) contribution. Your

401(k) is a great place to stash your extra cash tax-deferred,

where it can benefit from the potential of higher long-term

returns. Over the last 30 years, the S&P 500 has averaged a

rate of return of 9.9%,1 far out-pacing a traditional savings

account rate.

Other InvestmentsOnce you’ve saved enough for your emergency fund and

have taken full advantage of the tax benefits your 401(k)

offers, you can begin to explore other options for your

additional savings. This usually means opening a traditional

brokerage account, which opens up a variety of investment

options. With these types of accounts, you can invest in

a wide variety of longer term investments such as mutual

funds or ETFs. But be careful! You’ll want to be honest with

yourself about your level of investment savvy and how

comfortable you are with possible loss before choosing

this route.

1Source: Global Financial Data. Trailing 30 year annualized

return for the S&P (09/01/1986 – 08/31/2016) is 9.90%.

About John KleinJohn Klein is a Retirement Counselor for Fisher 401(k) Solutions. He brings more than 10 years of experience in financial planning and retirement education to his clients. John enjoys helping employees get the most out of their company retirement plans.

John earned his B.S. in Business Administration and Psychology from Southern Illinois University, Carbondale.

7NOVEMBER 2016

Finally—A Resolution You Can Keep!As we edge closer to 2017, many of us will consider

making resolutions for the upcoming year. But every

year, it seems like our resolutions flop—the exercise

routine ends and the “Learn French in a Minute” kit

collects dust in a closet.

This year, take the information in our feature article to

heart and make a simple resolution that will work for

you: Increase your 401(k) contribution rate (also known

as your deferral rate) by just 1%.

But, you say, 1% seems like a lot! Ok, let’s break it

down—1% percent equals $10 for every $1,000 of your

check. And if 1% still feels like too much, check your

plan to see if you can increase your contribution rate

by a certain dollar amount instead. Even setting aside

an extra $5 from each check over the coming years can

make a positive difference on your retirement future.

Increasing the amount of money you set aside will

improve your long-term financial outlook and help

provide you with a more comfortable retirement. If you’d like more information on how to increase your 401(k)

contribution rate, give the Fisher Investments’ 401(k) Solutions Help Desk a call at 888-322-7586.

Check It Out

CONTACT US

If you have a 401(k) account serviced by Fisher Investments 401(k) Solutions and need help or have

any questions, please contact us at 888-322-7586. We can help you with your 401(k) account, including

assistance with technical issues, as well as other service needs. We can also help answer questions about

the latest news developments and what it may mean in terms of investments and retirement planning.

ABOUT FISHER

Fisher Investments 401(k) Solutions is dedicated to helping business owners and their employees successfully

reach their retirement goals. We help people better optimize their retirement savings opportunities and

understand their retirement plan options through in-person enrollments, ongoing education and our live-

person Help Desk.

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K02163V November 2016©2016 Fisher Investments.

Investing in stock markets involves the risk of loss. Past performance is never a guarantee of future returns. This newsletter is intended for educational purposes only. It constitutes the general views of Fisher Investments and should not be regarded as personalized investment or tax advice or as a representation of investment performance. No assurances are made that Fisher Investments will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Not all past forecasts have been, nor future forecasts may be, as accurate as any contained herein.