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I agree about the 10% return being unrealistic, but I don't think $10,000 per year is right either. His spreadsheet shows $474,000 after 20 years. A 4% withdraw
by Kluny 11y ago
I agree about the 10% return being unrealistic, but I don't think $10,000 per year is right either. His spreadsheet shows $474,000 after 20 years. A 4% withdrawal rate on that is $18,960, which is still not exactly lavish, but more than enough to live on where I come from. Especially if your house is paid for, your healthcare is covered and your car doesn't break down very often. That's actually pretty close to my annual expenditure, and I rent, have to pay for health insurance, and my car breaks down all the damn time.
- JamesBarney 11y agoA large part of the $474,000 was accumulated interest, and interest on that interest. At 4% interest the accumulate capital is about $252,000 instead.
- ryandrake 11y agoA consistent 4% interest rate is an incredible return. A more realistic risk-free rate nowadays is 1/10th that.
- Kluny 11y agoYou can't usually count on consistent returns, no, but as an average return that's pretty safe (assuming a mix of equity and bond index funds). My mutual fund have averaged that much in the past ten years, despite two major stock market dips when they went negative.
- IkmoIkmo 11y agoKinda depends I guess... The 10 year US bond is often used as a risk free rate and it's about 2.2% right now if I remember correctly, and it's been as high as 3% in the past five years. And of course you can sell bonds too so it's not like they're illiquid, it's generally known as one of the most liquid markets on the planet. But there's a bit more risk than than a 3 month bill of course which is also used as a risk free rate indicator quite a lot, and that's really low with inflation being so low right now. Anyway I wouldn't call 4% incredible but it's definitely good and something many would be quite happy with.