I pay virtually no attention to my retirement accounts (which is bad in some ways, but at least I don't engage in the bad habit of trying to time the stock market). Nevertheless, for the first time in a decade, I wanted to take a look at my TIAA-CREF accounts, since I had recently noticed a spike there.
There have been no additions or withdrawals to these accounts since 1990. These funds have been riding the surf of the stock market since then, and so may be a pretty-good indicator of how things are going with retirement funds in the stock market, in general.
The 20-year-graph (1992-2012) shows an increase of about 6.6% per year (the plotted fit). The two great recent bubbles - the Dot-Com boom and the Real Estate boom - are clearly-evident. The recent spike in returns appears to be just part of the complicated noise of the recent market. There have been other spikes in the recent past - even bigger than the current spike - that ultimately meant little, since crashes soon followed. No new bubble is clearly evident - yet - but may come sooner than we think. Booms are when the biggest players make their biggest killings, and so they are earnestly trying to recreate those conditions even as we speak.
Meanwhile the Consumer Price Index (CPI; 1982-84 average of 100 is baseline) is increasing at a remarkably-stable rate of 2.5% per year (with only a mild burst of inflation evident in 2008; when credit momentarily seized and everything else was spinning out-of-control). The difference between these two rates is 4.1%, which is what I clear.
Nevertheless, there are many potential pitfalls. If I can't avoid touching these funds until retirement (as appears increasingly-likely, given my shaky job situation), then I have to pay taxes on them, so I ultimately won't clear 4.1%. And if the stock market tanks again, then that's more grief too.
Like Dostoevsky knew, in a casino, you have to have nearly-inhuman patience, and uncommon luck, to do well.
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