Episode 19: The Big Difference Between Average Returns vs Actual Returns

March 22, 2024

When I ask my clients what kind of returns they have received since they’ve been investing in their 401(k)’s and IRAs, almost without fail they answer, “7%-8%.” 

“And how much have you been saving?”, I ask.  This answer varies greatly, but most of my clients have been diligent savers.  They just have been storing their money in inefficient vehicles and investments.  

Let’s take a client who has been saving on average $10,000 per year between their contributions, plus any matches they may have received from their employers.  With a 7% annual return, this person should have over $1 million after 30 years.  

If that’s the case, why aren’t there more millionaires?  What happened?!  They’ve been doing all of the right things.  Their statements say they’ve been averaging 7%.  Everyone has been telling them to stuff money into their IRAs and just “let it ride.”  

So, what the hell happened?

First of all, fees.  Fees are not calculated in your returns, yet they can drain massive amounts of your retirement funds.  According to a 2012 study done by the thinktank, DALBAR, high 401(k) fees can drain $155,000 from an average household over a lifetime.  Higher-earning households can lose even more — up to $278,000.  We will address the 16 different fees that can be found in managed money, and how to discover them, in another newsletter.

Second, your contributions are most likely being calculated in your returns.  Meaning, that every time you add money to your account, that is being shown as a gain.

Third, you’re looking at the ‘average’ return vs. paying attention to the ‘actual’ return.  Confused yet?  I’m going to teach you something called, “Wall Street Math.”  And I want you to remember this for the rest of your life.  This is extremely important so you can never be fooled again.

What if I told you, I could get you an “average return” of 25%?  You may be skeptical, but I would probably have your attention.  Let’s take a look at how people get fooled on a daily basis by looking at their statement returns.

Well, I upheld my end of the bargain.  I got you an “average return” of 25%.  And yet, you know there’s something not right because you have the exact same amount of money you started with.  But, what if you were so impressed with my genius of doubling your money that first year (it’s not genius, it’s luck) that you decided to start adding more to the fund?  Say, an additional $10,000 for the next 3 years.

Now I bet you’re really confused.  You actually lost money, but your statement still shows you had a 25% return.  But guess what?  We haven’t even factored in fees.  What would a 1% management fee and a 1% fund fee do to your return?

Once the fees are factored in you can see that you lost almost $13,000 just in expenses, but it did not affect your “average return”.  Can you imagine having to decipher decades of these types of statements to figure out what your “actual returns” have been?  It’s next to impossible.

My point in this article is not to make people feel dumb for the investments they have made.  Most people have been practicing the right disciplines throughout their working years, but they were just thrown into a game that is rigged against them.  My point is not even to bash the advisors who manage money in this rigged system.  I believe most of them are good people with good intentions but are limited in what they can offer to their clients.

My point is to bring a sense of clarity and address that gut feeling you’ve had that something is not right.  There are options available that will cut the confusion out of your financial situation by giving you a straightforward understanding of what your returns are, and they can be guaranteed if that’s what you’re looking for.  

If you have been saving and investing for decades and are nearing retirement, or you are retired already, let’s talk

  • Let’s talk about what you can “actually” get.  Not what I think your “average” will be during your retirement. 
  • Let’s talk about mitigating useless fees that eat away at your wealth. 
  • Let’s talk about taking control over your retirement. 

And, let’s talk about using my ATLAS Annuity Strategy to make sure you never run out of income no matter what happens in the market, and no matter how long you and your spouse live. 

Start your educational process by listening to this week’s ATLAS Annuity Podcast for even more examples.  Then check out my video series, “20% More Spendable Income in Retirement”, and take the time to book a short phone call to see if the ATLAS Strategy is right for you by clicking the “Schedule a Call” button in the top right corner!

All the best,


Reading Time: 4 minutes


Watch this short video series to learn which annuities I use and how I use them to get an average of 20% more spendable retirement income than any other advisor plans you've seen.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}