Retirement Planning

[Bob B.]

I'm doing some very simple retirement planning. I won't be retiring for 20-25 years. I have about $80,000 saved for retirement right now. I'm figuring I'll need somewhere between $950,000 and $1,200,000 to retire. I make $55,600 now, and have assumed 1.5% pay raises.

I contribute 15% of my gross income to retirement right now. That includes employer match. What is the best number to assume for a long-term retirement fund growth rate?

At 7% growth I calculate $950,000 in 2035 (age 62) and $1,200,000 in 2038 (age 65).
At 8.5% growth I calculate $950,000 in 2032 (age 59) and $1,200,000 in 2035 (age 62).

Should I assume a more aggressive growth rate over the first 15 years, and a less aggressive growth rate over the final 10 years?

Any help is appreciated.

[97guns]

why do you need a million to retire? i retired with under 300K, if you make your money earn money you do not need a mil. i invested 250K into 4 houses bearing 10-12%

if i had 80K right now i would dump the whole thing into physical silver, triple up in 2 years and get into income producing real estate. and no im not kidding about the silver

the 50K i had left over from my real estate venture went into physical silver last june along with 3 401K's for another 50K, since then i have been dumping every penny from rents into physical metal and my metal portfolio has grown to 240K, nearly doubling up my net worth in 1 year.


you say but gold is in a bubble - my rebuttal is the dollar and every other unbacked fiat currency in the world has bubbled and on the verge of crash, gold and silver will only go higher.

please look at whats happening in europe with their banking and currency crises and with bank of america right here with their bad assets..

[Petunia 100]

I think that 7% is a very reasonable assumption. (Not guaranteed, but very possible.)

We hear a lot about the 2000s being the "lost decade". But those who had a diversified portfolio, rebalanced, and watched their expenses did just fine. Please see this blog post which references a Wall Street Journal article written by Burton Malkiel (author of "A Random Walk Down Wall Street").

Buy, Hold, and Rebalance! How Patient Investors Still Quietly Grow Their Money » My Money Blog

So we see that even in a terrible decade, following the tried and true tenets an everyday investor could have turned 100k into 191k and change. That is close to doubling in 10 years, and that is close to a 7% return (rule of 72).

[disneysteve]

i retired with under 300K, if you make your money earn money you do not need a mil. i invested 250K into 4 houses bearing 10-12%

the 50K i had left over from my real estate venture went into physical silver last june along with 3 401K's for another 50K

So explain this to me. Your 250K in real estate returns 10%. That's 25K/year. You are investing that into more silver which has a 0% yield - it pays no current interest/dividends/income. What money are you living on? How are you paying your bills if all of your money is tied up in either real estate or silver?

[Scanner]

Well this is a recurrent discussion that I never mind revisiting over and over again - but how much is enough is the question of the day? Do we really need a million dollars to retire? 4.2 million dollars used to kind of be the financial advisor (who are in the business of becoming custodian of your monies) figure. Now that all seems kinda ridiculous in these deflationary/depressed times.

If the average person has $17,000 at retirement in net worth. . .well. . .doesn't the old saying hold true:

"I don't ahve to outrun the bear chasing me. . .I just have to outrun you."???

After all, isn't wealth just as much as feeling more wealthier than the next chucklehead?

[alphadore]

Well, I guess you want to live very comfortable when you retire and that's why you need a million dollars. My suggestion is that you consult to a financial analyst and let them create a capital guaranteed portfolio for you. Example: 80 percent non zero coupon T-bond and 20 percent stocks. They should just do the trick.

[photo]

i retired with under 300K,

But I bet you receive a nice little gift from all of us who pay taxes. Someone retiring in 25 years will probably not be so lucky.

[jpg7n16]

why do you need a million to retire? i retired with under 300K, if you make your money earn money you do not need a mil.

Inflation.

In 25 years, assuming 3.1% inflation - $300k today is like $650k 25 years from now.

Having $1 million 25 years from now, is like having $461k today. Which isn't too much different than your $300k. A little higher, yeah - but not crazy.


You can't compare your current costs of living with what his costs of living will be 25 years down the road.

[jpg7n16]

What is the best number to assume for a long-term retirement fund growth rate?

To answer your question:

1) The best is to figure between 7-11% returns compounded. If you're planning to be conservative, go with the lower end. 7% is a very reasonable estimate.

I like to calculate both at 7 and 11%, and assume it will be between those two figures somewhere.

Hope for the best, plan for the worst.

[alphadore]

"Hope for the best plan for the worst", I like that.

[Petunia 100]

Artwest, a 6% withdrawal rate is very aggressive. If you are hoping to have your money last at least as long as you do, you will be better off with a lower withdrawal rate. Or at least be willing to decrease your withdrawals in years the markets aren't performing well.

[maat55]

I'm considering an allocation of 30% annuity, 20% laddered bonds and 50% value stock funds during retirement.

I will replace laddered bonds during good years(out of market earnings) and holdoff replacing during down years.

[ez1]

Honestly, the best analyses I read suggest that you can't expect anything better than a zero percent return over inflation (so maybe about 3-4% ?) in the next 10-15-20 years. This is based on long term market valuation metrics. There's lots of great stuff on this at dshort.com ... well, not "great" if you look at the predictions

[disneysteve]

Honestly, the best analyses I read suggest that you can't expect anything better than a zero percent return over inflation (so maybe about 3-4% ?) in the next 10-15-20 years.(

What makes you think that is the "best" analysis? I certainly don't believe that the market will have a 3-4% return over the next 20 years.

I think 6-7% is a reasonable number for retirement projections assuming you have a well-diversified portfolio with a significant equity allocation.

[Petunia 100]

Artwest, are you familiar with The Trinity Study? According to the Trinity Study, at 6% withdrawal rates:

a portfolio of 100/0 stock/bond has a 68% success rate of lasting 30 years

a portfolio of 75/25 stock/bond has a 68% success rate of lasting 30 years

a portfolio of 50/50 stock/bond has a 51% success rate of lasting 30 years


Of course, a person with other resources or a person who expects a shorter retirement may feel very comfortable with a 6% withdrawal rate. Again according to The Trinity Sutdy, at 6% withdrawal rates:

a portfolio of 100/0 stock/bond has a 91% success rate of lasting 15 years

a portfolio of 75/25 stock/bond has a 95% success rate of lasting 15 years

a portfolio of 50/50 stock/bond has a 93% success rate of lasting 15 years


The 15 year numbers look great. A person who needs to plan for a longer withdrawal period may do well to consider a lower withdrawal rate.