Investment returns, not savings, critical to retirement income

A long-term, diversified investment approach is the best way to maximize the chance of successfully meeting retirement income goals, according to new research by Russell Investments.

Investment returns generated by 401(k) savings during an individual's retirement play the critical role in providing retirement income. According to Russell research, this contradicts conventional belief that retirement income is derived predominantly from savings and returns accumulated during a participant's working years.

Russell's latest report builds from research in a 1989 report, ""A Model of Pension Fund Growth" in which Don Ezra, director, Investment Strategy, modeled a DB plan growth and found that "for any one plan member, the largest part of the investment return…accrues during the payout stage." This approach was later dubbed the 10/30/60 Rule by authors Matt Smith, managing director, Retirement Services and Bob Collie, director, Investment Strategy.