If you were a couple and retired at age 65, there’s only a 1 percent chance that both of you are still alive after 30 years. Death becomes more likely than portfolio failure And you still have a lot more assets - $535,163 - than when you began. Indeed, if you retired 30 years ago, you’ve kept up with inflation. Even though the value of your portfolio declined in three of the first 10 years, the rush of the late ‘90s carried you through three consecutive years of the dotcom crash as the new century began. If you started 30 years ago, you had the benefit of the bull market of the ‘90s. A good start, on the other hand, can help you weather later market disasters. Financial planning types call that “sequence of returns risk,” noting that a bum start is, well, a bum start. How you made out depends a lot on what happened in your first years of retirement. Figures are based on asset class index returns, not actual fund performance, so they don’t account for the cost, however low, of an actual index mutual fund or exchange-traded fund. Source and notes: and author calculations. The complete annual results for the Couch Potato and Margarita are below as Table 1 and Table 2. Over the 30-year time period, annual withdrawals grew to $8,340. This table is based on an initial investment of $100,000 and a starting withdrawal rate of $4,000 (4%) adjusted annually for inflation with all portfolios going to year-end 2018. The How-Much-Is-Left-In-Your-Retirement-Account-Contest? The surprise is that it served retirees better in every time period, often by a wide margin, than the Margarita portfolio. As you can see below, the basic Couch Potato portfolio survived the last 30 years rather well. Created in honor of The-Buffett-Named-Jimmy, it is three equal parts domestic stocks, international stocks and domestic total bond market. It is one-half domestic total stock market and one-half domestic total bond market. One portfolio is the dirt-simple basic Couch Potato portfolio. We’re looking at time periods from 30 years to the last three years. The dollar amount was then inflation-adjusted each year. We’re assuming they started with $100,000 and an initial 4 percent withdrawal rate. Instead, we’re going to look at how two basic Couch Potato portfolios have worked for retirees – in dollars. So I’m not going to measure return on investment here. You’ve struck an existential chord – no one wants to run out of money. That doesn’t happen when you talk about living a long time and not running out of money. Talk about return on investment and people go all glassy-eyed.
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