First and foremost very thankful for this page and everything it has taught me. I have noticed that each year, many of the “experts” (and also corroborated by what I see in many threads on this site as well) have been stating how you will need far more money in the future to retire due to accelerated inflation and also how the safe withdrawal rate and expected real return rate keeps needing to be lowered. First people were planning on 7% real returns, then 5%, then 3%. Now I am even seeing people who say they are planning for and will only expect 0-2% real even when they are 100% equities. The safe withdrawal rate has also dropped in many threads from 4% to 3% and now 2.8% according to Ben Felix (who is hard to dispute). I think Wade Pfau suggests even lower.
My question is this: I have about a 31 year time horizon to retirement (will be 62 then)… if it ever gets to a point where, even with 100% equities, we can only expect 0-2% real returns over the next 3 decades, and will also need a safe withdrawal rate of like 2-3%, it becomes defeating and almost seems not worth it for the risk taken if that is all one can hope for. I understand “what is the alternative” but it still worries me.
My wife and I by the end of the year will have about 200k in retirement accounts, 100% equities. When I enter that into a compound interest calculator over 31 years at 2% real, and continuing our monthly contributions of 3000 to 3300 a month (inclusive of vested matches), we get roughly 2-2.1M. At a 2.8% withdrawal rate that is about 56k a year to live on. While that would still “work” based on our expenses, it is just barely enough and will not allow us to really do much more than survive comfortably in retirement but not enough to travel or really enjoy anything. And that is with being very far ahead for a 30 year old and investing 3300 a month which is more than most people I know can do. Will there really be a reality where one has to invest 5-10k a month just to have a normal middle class/upper middle class retirement?
My question is this: I have about a 31 year time horizon to retirement (will be 62 then)… if it ever gets to a point where, even with 100% equities, we can only expect 0-2% real returns over the next 3 decades, and will also need a safe withdrawal rate of like 2-3%, it becomes defeating and almost seems not worth it for the risk taken if that is all one can hope for. I understand “what is the alternative” but it still worries me.
My wife and I by the end of the year will have about 200k in retirement accounts, 100% equities. When I enter that into a compound interest calculator over 31 years at 2% real, and continuing our monthly contributions of 3000 to 3300 a month (inclusive of vested matches), we get roughly 2-2.1M. At a 2.8% withdrawal rate that is about 56k a year to live on. While that would still “work” based on our expenses, it is just barely enough and will not allow us to really do much more than survive comfortably in retirement but not enough to travel or really enjoy anything. And that is with being very far ahead for a 30 year old and investing 3300 a month which is more than most people I know can do. Will there really be a reality where one has to invest 5-10k a month just to have a normal middle class/upper middle class retirement?
Statistics: Posted by BizarroJerry — Fri May 17, 2024 9:53 am — Replies 32 — Views 1947