03-01-2022, 07:29 AM
The question is this:
The US stock market returned average 8.9% a year since 2000. If one has $1M in stock investments, and need $50K a year (inflation adjusted) how long can you sustain your retirement from yr 2000 onwards.
Adjusting the 50K withdrawal for inflation every year ie. First yr 50K, 2nd year 51K ...in 2018 you need roughly $70+K due to inflation.
Because the return is 8.9% on average your $1M portforlio is expected to grow $89k a year.
So simple maths tells you the money will last very long ....maybe forever iyf 8.9% returns continue.
Reality using real data is you will run out of money after 18yrs.
![[Image: 3d6EiZ2.jpg]](https://i.imgur.com/3d6EiZ2.jpg)
The reason for this is stock market return is not uniform and changes a lot from year to year. Some years when stock market is down a lot and you have to sell to raise funds you actually sell your investments at a low price. When it recovers your portforlio grows from smaller amount after your withdrawal.
The best return distribution is positive returns in part a s poor returns later.
Living partially or fully on dividends rather than capital gains is more sustainable.
If your $1M portforlio pays $50K in dividends and the dividends grows at faster than inflation, the money lasts forever.
To be certain, retirement planning should involve multiple sources of income.
The US stock market returned average 8.9% a year since 2000. If one has $1M in stock investments, and need $50K a year (inflation adjusted) how long can you sustain your retirement from yr 2000 onwards.
Adjusting the 50K withdrawal for inflation every year ie. First yr 50K, 2nd year 51K ...in 2018 you need roughly $70+K due to inflation.
Because the return is 8.9% on average your $1M portforlio is expected to grow $89k a year.
So simple maths tells you the money will last very long ....maybe forever iyf 8.9% returns continue.
Reality using real data is you will run out of money after 18yrs.
The reason for this is stock market return is not uniform and changes a lot from year to year. Some years when stock market is down a lot and you have to sell to raise funds you actually sell your investments at a low price. When it recovers your portforlio grows from smaller amount after your withdrawal.
The best return distribution is positive returns in part a s poor returns later.
Living partially or fully on dividends rather than capital gains is more sustainable.
If your $1M portforlio pays $50K in dividends and the dividends grows at faster than inflation, the money lasts forever.
To be certain, retirement planning should involve multiple sources of income.