Wharton@Work

October 2014 | 

Investing for a Lifetime: Managing Wealth for the “New Normal”

Investing for a Lifetime

When Fidelity Investments announced a couple of years ago that to fully fund their retirement, investors needed to save eight times their annual income, a collective groan went out. Eight times? It sounded incredibly difficult to achieve. But Wharton finance professor Richard Marston thought differently. “The goal … seemed too low to me. So I set out to determine what the savings goal should be for investors with different levels of income.”

Marston’s calculations, along with plenty of other practical advice, may be found in his new book, Investing for a Lifetime: Managing Wealth for the “New Normal” (Wiley, 2014). The book traces the savings and investment decisions that must be made at different stages of life, and offers non-technical information about investment assets classes and how to build a portfolio. “Savings and retirement planning is often viewed as so complex that many Americans just tune out. Unfortunately, we cannot afford to do that,” he says.

Investing for a Lifetime uses recent market history and solid research to take the guesswork out of the most important financial decisions. Along the way, Marston’s no-nonsense approach guides the reader with opinions that are sometimes startling, but well-argued, including:

  • A home is “consumption,” not an investment
  • The 4 percent rule for retirement spending still holds
  • Diversifying into foreign stocks is important, even though U.S. and many foreign markets are highly correlated
  • Stick to a strategy, avoiding the investment temptations that arise during very good and very bad times
  • Retiring at 62 instead of 66 creates serious financial consequences

Marston declares, “Investing is relatively easy…. It is much harder to save.” Armed with his new book, investors will be able to do both, taking the guesswork out of both saving and investing.