LPL FINANCIAL R E S E A R C H

Investing
Insights

don’t let your assets

retire when you do
Whether you plan to play golf, travel the world, or spend more time with family, determining
your retirement needs is the first step to defining how the assets you’ve worked hard to
build, keep working for you. Consider these factors when determining your investment plan.

inflation
impact
10% lower
interest
1.2

1.0
1.00

0.96
0.92

rates
0.83
8% 0.8 0.85
0.79
0.75
0.81 0.71 0.69
0.77 0.65 0.63
0.73 0.70 0.58
6% 0.6 0.66 0.64 0.54
0.60
0.56

4% 0.4 Inflation Erodes your Savings

$
0.2
2%
0 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
0% Source: Haver Analytics
1985 1990 1995 2000 2002 2003 2004 2005 2006 2007
6-month CD rates Even with inflation at historic lows, a 2.5%
Source: Haver Analytics
inflation rate will erode your savings by
As long as interest bearing accounts offer only
63.86% after 20 years.
single digit rates of return, retirees often find
themselves in need of investments with more
growth potential.

increased The cost of food and beverages has

costgoods of increased by more than 80% in the

last 20 years. 1987 $111.80
1997 $156.24
2007 $203.40
Source: Haver Analytics
 INVESTING IN S IG H T S

plan to
enjoy Planning for your changing needs can be a daunting task. As you can see in this
example, three different portfolios, each with varying investment objectives,

yourself yield significantly varying returns and volatility over a 27-year timeframe.

If you’re nearing retirement, your financial advisor can help. They will work with you to define your objectives and
implement a sound strategy that seeks to address your goals and provide greater satisfaction. Once in place, you
can plan to enjoy yourself.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price.
Stock investing involves risk including loss of principal.

$250,000 Initial Investment

1980 to 2007
Past performance is no guarantee of future
$7,000,000 results. Indices are unmanaged and cannot be
$6,824,625 invested into directly. This is a hypothetical
model and is not representative of any specific
$6,000,000 situation. Your results will vary. CDs are FDIC
insured and offer a fixed rate of return if held
to maturity. Source: LPL Financial/Zephyr.
$5,000,000 $5,209,380 Performance of the LPL Financial Model
Portfolios using the Normal Allocations and
historical returns of Stocks (represented by
$4,000,000 the R3000 Index), Bonds (represented by the
Lehman Brothers Aggregate Bond Index), Cash
$3,352,977 (represented by U.S. Treasury Bill returns) and
$3,000,000
Inflation (using the CPI, all items seasonally
adjusted).
$2,000,000
MODEL OBJECTIVES
Aggressive Growth: Emphasis on aggressive
$1,000,000 growth and maximum capital appreciation. No
$685,454 need for income and considered highest level of
risk over a long time horizon.
$0
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 Growth with Income: Emphasis on modest capital
growth with some focus on current income. Use
Aggressive Growth Income with U.S. CPI of high quality equity, fixed income and cash
Growth with Income Capital Preservation equivalent securities.
All Items SA
Cash Cash Cash (Inflation Index) Income with Capital Preservation: Emphasis
5% 5% 10% Stocks on current income and preventing capital loss.
20%
Bonds Lowest risk and generally the shortest time
35%
horizon.
Stocks Stocks Bonds
95% 60% 70%

This research material has been prepared by LPL Financial.

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