3 ms·

Depends on how conservative you want to be. For me personally I've been using an inflation-adjusted rate of 5% annually, but I consider that very conservative a

by tcoppi 10y ago

Depends on how conservative you want to be. For me personally I've been using an inflation-adjusted rate of 5% annually, but I consider that very conservative and hope to realize a much longer rate over my time horizon. But if I do realize only 5% annualized, I will be sure to have more than enough to not live in squalor. If realized rates over the next ~30 years are less than 5%, not only are we as a civilization going to have bigger problems than my retirement, but I don't think much anything will save you regardless of how much you are saving, unless you have a very frugal retirement.

FabHK 10y ago
Historical long term real rates hover around 6%, and I'd consider real rates of 5% for the next decade quite optimistic, not conservative. Also, regarding safe withdrawal rates, consider that (depending on the jurisdiction) in retirement you might have to pay taxes on the nominal rates, but then leave enough to compensate for inflation. Say: 4% nominal, pay 25% taxes, leaves you with 3%, but 2% inflation, so you can safely withdraw only 1%. Thus, conservatively, $1m might give you only 10k a year.
- tcoppi 10y ago
  From 1871 to the end of 2015 returned 6.86% annualized in real dollars. Most 30-year periods you can pick out average either that or above, save a few odd periods. [1] I use [2] to do most of my predictions. I think you are being way conservative with assuming a 4% withdrawal rate will only give you $10k real dollars on $1m invested, but everyone has different risk tolerances and assumptions :) 1. http://www.moneychimp.com/features/market_cagr.htm http://www.moneychimp.com/features/market_cagr.htm 2. http://www.firecalc.com/ http://www.firecalc.com/
  - FabHK 10y ago
    Agreed, 1% withdrawal is (hopefully) worst case. But given the last decade, 4% strikes me as not particularly conservative. Disclaimer: I'm looking primarily at Germany and HK, where growth and equity returns, respectively, have been lacklustre over the last decade. Though, even the S&P 500 has only made 2.5% p.a. since 2000.

by tcoppi 10y ago

FabHK 10y ago

Historical long term real rates hover around 6%, and I'd consider real rates of 5% for the next decade quite optimistic, not conservative. Also, regarding safe withdrawal rates, consider that (depending on the jurisdiction) in retirement you might have to pay taxes on the nominal rates, but then leave enough to compensate for inflation. Say: 4% nominal, pay 25% taxes, leaves you with 3%, but 2% inflation, so you can safely withdraw only 1%. Thus, conservatively, $1m might give you only 10k a year.

tcoppi 10y ago
From 1871 to the end of 2015 returned 6.86% annualized in real dollars. Most 30-year periods you can pick out average either that or above, save a few odd periods. [1] I use [2] to do most of my predictions. I think you are being way conservative with assuming a 4% withdrawal rate will only give you $10k real dollars on $1m invested, but everyone has different risk tolerances and assumptions :) 1. http://www.moneychimp.com/features/market_cagr.htm http://www.moneychimp.com/features/market_cagr.htm 2. http://www.firecalc.com/ http://www.firecalc.com/
- FabHK 10y ago
  Agreed, 1% withdrawal is (hopefully) worst case. But given the last decade, 4% strikes me as not particularly conservative. Disclaimer: I'm looking primarily at Germany and HK, where growth and equity returns, respectively, have been lacklustre over the last decade. Though, even the S&P 500 has only made 2.5% p.a. since 2000.