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What about the 4% rule (put it in an index fund and hope for an average 7% return, leave 3% for inflation and live off the rest)? I always figured that would wo

• deanmoriarty 8y ago
  A few points: 1) If you keep it under your mattress it will be much less than what I described, because every year your nest egg will shrink due to inflation, so you'll just be able to take $25k non-inflation adjusted, which is a big difference from my $25k inflation adjusted (in 60 years, $25k will be $150k at a 3% inflation). My assumption is 0% real growth, not 0% nominal growth, which is what you'd get by keeping it under the mattress. 2) The 4% rule is based on a shorter retirement interval (30 years) than what I'm looking for (60 years). Try to go on firecalc.com and look for the statistical odds of 1M giving you 50k/y for 60 years: the failure rate is higher than the success rate, and that's based on historical data. 3) Yes, my assumptions are very conservative, but I don't believe index funds will return 7% nominal over the next few decades, the world is going to face too many problems in my opinion. That being said, pretty much all I have is invested in index funds despite my opinions (mainly because I wouldn't know where else to invest it, since both cash and bonds are sure losers to inflation), so in the best case I'll be pleasantly surprised.
  • pault 8y ago
    I regret trying to give you advice. You have clearly planned your life much better than I have. :)