Hi all,
I've seen a lot of good info on this forum and website so thought I'd join.
Like most here I think, I'm interested in early retirement, and am in the assessment/planning stage.
One study I saw (I'm pretty sure it was posted here) showed the results of an analysis to the question of 'How much can I safely withdraw from my portfolio?'.
As I recall, the study showed, for different lengths of retirement (30 yrs, 40 yrs, etc) the maximum percentage of a portfolio that could be withdrawn (and still have money at the end) when compared to the historical DJIA all the way back to pre-Great Depression times.
The study concluded that either 3% or 4% could be withdrawn depending on which length of retirement one used.
That looked great, and so I wanted to validate it myself, so I obtained historical DJIA data and tried to do the same analysis. It appeared to confirm the results.
However then I realized that that analysis did not appear to take into account inflation.
To take that into account, I also factored in actual historical CPI information (back to 1914) to make corrections to the DJIA.
When I did that, the result came out significantly different, with maximum safe withdrawals of as low as 1.7%, especially if one retired as recently as 1965.
Such a correction would greatly impact at what point one could retire - one might need to double the size of one's portfolio before retiring.
Could someone provide some input on this? Have I done that analysis correctly? or have I overlooked something?
Some input would be greatly appreciated.
I've seen a lot of good info on this forum and website so thought I'd join.
Like most here I think, I'm interested in early retirement, and am in the assessment/planning stage.
One study I saw (I'm pretty sure it was posted here) showed the results of an analysis to the question of 'How much can I safely withdraw from my portfolio?'.
As I recall, the study showed, for different lengths of retirement (30 yrs, 40 yrs, etc) the maximum percentage of a portfolio that could be withdrawn (and still have money at the end) when compared to the historical DJIA all the way back to pre-Great Depression times.
The study concluded that either 3% or 4% could be withdrawn depending on which length of retirement one used.
That looked great, and so I wanted to validate it myself, so I obtained historical DJIA data and tried to do the same analysis. It appeared to confirm the results.
However then I realized that that analysis did not appear to take into account inflation.
To take that into account, I also factored in actual historical CPI information (back to 1914) to make corrections to the DJIA.
When I did that, the result came out significantly different, with maximum safe withdrawals of as low as 1.7%, especially if one retired as recently as 1965.
Such a correction would greatly impact at what point one could retire - one might need to double the size of one's portfolio before retiring.
Could someone provide some input on this? Have I done that analysis correctly? or have I overlooked something?
Some input would be greatly appreciated.