Investment Expectations in Railroad RetirementVideo Retirement Financial Planning Investing
What kind of investment returns are you expecting for your Railroad Retirement? Welcome everyone, to another edition of the Highball Advisors Railroad Retirement Whiteboard. My name is John McNamara of Highball Advisors. And today's, what I'd like to talk about is kind of more psychological than it is really tactical about Railroad Retirement. And it's talking about your expectations for growing your money, as you prepare for Railroad Retirement. So I came across a really interesting survey done by these investment managers, Natixis or something like that. I don't know why companies have names that people can't pronounce, but anyway, they did a great survey. There was a couple thousand investors and they actually did it globally, but we'll just focus on North America for this video.
And they said to the investors, "Well, what kind of returns are you expecting this year?" And to their shock, they said, "17.5% annual return after inflation." Well, the attack on another 3% or so, probably more this year for inflation, you're well into 20%, expectations by investors for the year. I mean, that's just a tremendous, tremendous year. That's really high. So then they said, "Okay, well, let's ask the same question of financial professionals, right?" People who deal with markets, historical knowledge of the markets, all those types of things. They said, "6.7% is kind of what we want to do, mixture of equities and bonds." And that's a very good year, right?
So look at that gap here, the expectation gap between what investors are looking for and what the professionals are, 161%. That is huge. That is huge. So I just kind of want to put everything in perspective here, right? Understanding, setting our expectations. We're long-term investors, obviously. So the S&P, it's done great. In 2020, it did 18.4%, the S&P 500, the 500 largest companies in the U.S. Okay and this year it's up almost 16%. So, hey, maybe that's where they get that number from. Maybe they're not that crazy.
However, those are huge, huge numbers, all right. I throw this in here, they didn't throw this in here, but I just want to let you know that Bernie Madoff ran his Ponzi scheme promising a little bit over 11%. Now he promised it as consistent in volatility, but I'm just saying these numbers are really big numbers, that expectation game. But the performance is great and we're long-term investors, but I feel like it's a little bit unrealistic. So let me just walk you through why I think it's unrealistic. Because if you could get 17.5%, all right, let's walk through the numbers. You got 30 years of compounding, you take $10,000, 30 years at 17.5%, you've got $1.25 million. I'm done, there's your retirement. Go borrow $10,000 right now, put it in and get your 17.5% and you're set for retirement. We know that's not realistic.
So the average, I just want to... average bull market since 1932 has been 3.2 years. And that's where you get these great years like that. We had the longest one was 11 years, and that was the bottom from the 2008 financial crisis. We had a long run for 11 years to, until COVID came. And then we ended the bull run, but it was actually the shortest bear market, because I think it was over in like three months. And now we're into another bull market, obviously, from the lows there.
But the purpose once again, is just kind of reset everybody's expectations. Hey, we always want to have our up years, but if we're long-term investors over time, if we can just achieve our, 8, 9, 10% over time, we'll be okay. But we're going to have some great years and we're not going to have and we're going to have some really bad years, but it's unrealistic to be expecting 17.5% every year. So don't plan on it, don't make a big life decisions off that number.
So I hope you found this video helpful. It's not to be a Debbie Downer, but I just want to get everybody's mindset proper for investing for Railroad Retirement. Listen, please subscribe to the YouTube channel, share it with other railroaders that you know with. Channel's been going great, I appreciate it. Reach out to me if you want to talk about investment strategies, I have a boarding for Railroad Retirement assessment. It's really great for people, especially nearing Railroad Retirement. So, contact me on that, just click on the link and that will be good. So everyone, till next time, please stay safe, stay on track and take care. So long everybody. Bye.
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