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Retired 6 years and real return is nagging me
Old 07-02-2010, 05:43 PM   #1
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Retired 6 years and real return is nagging me

I'm 41 years old and I retired at 35. Lucky I know. I have a well diversified portfolio mainly of ETF's and Vanguard funds. What is bugging me is that even though my portfolio is up a nominal (after withdrawal) amount of 2.42% my REAL return I have calculated is -10.15%. I base my withdrawals off the current account balance and use a WR of 3%. So I feel like my withdrawals have shrunk basically -10.15% since I retired. I have a financial cushion built in but this trend worries me to lose 10% buying power in 6 years. Is anyone else feeling the same way. Have you retirees in the last 10 years been able to keep up with inflation?
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Old 07-02-2010, 10:39 PM   #2
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if the nominal return is 2.42%, how could the real return is -10.15%?
Approximate formula: Real Return = Nominal Return - Inflation.
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Old 07-03-2010, 08:05 AM   #3
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It's possible if the nominal return was +2.42% over the entire six year period (i.e. -- not annualized ROR) and inflation ran approximately 2% per year over that same period.
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Old 07-03-2010, 12:39 PM   #4
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I think you might be forced to return to work. You have 40 years to go. Or consider moving to a less expensive place.
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Old 07-03-2010, 01:40 PM   #5
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Quote:
Originally Posted by outofratrace View Post
I'm 41 years old and I retired at 35. Lucky I know. I have a well diversified portfolio mainly of ETF's and Vanguard funds. What is bugging me is that even though my portfolio is up a nominal (after withdrawal) amount of 2.42% my REAL return I have calculated is -10.15%. I base my withdrawals off the current account balance and use a WR of 3%. So I feel like my withdrawals have shrunk basically -10.15% since I retired. I have a financial cushion built in but this trend worries me to lose 10% buying power in 6 years. Is anyone else feeling the same way. Have you retirees in the last 10 years been able to keep up with inflation?
Yeah, there's no question the last three years of your retirement have been pretty bleak financially, has been for all of us. But what was the first three years like.....didn't that include some spectacular double-digit returns? To quote a certain board personage's mood......"wheeeeeeeee!"

Point is, we are going through a rough-patch right now, but the 'good-times' will likely return again and what might that do to the, say, nine-year rolling average?

Bolded text above is what is relevant IMHO, the %'s to two decimal places are really not .

Cheers - Mick
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Old 07-03-2010, 05:54 PM   #6
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Scarey post. I'm real happy to be in property. I don't care what the property market or the stock market does. My rent comes in every month whatever the markets are doing. I sleep real well at night.
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Old 07-03-2010, 06:19 PM   #7
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I'm really happy for you.
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Old 07-03-2010, 06:34 PM   #8
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Scarey post. I'm real happy to be in property. I don't care what the property market or the stock market does. My rent comes in every month whatever the markets are doing. I sleep real well at night.
So are you inviting the OP to move in with you to help him out?
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Old 07-03-2010, 06:36 PM   #9
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Quote:
Originally Posted by outofratrace View Post
I'm 41 years old and I retired at 35. Lucky I know. I have a well diversified portfolio mainly of ETF's and Vanguard funds. What is bugging me is that even though my portfolio is up a nominal (after withdrawal) amount of 2.42% my REAL return I have calculated is -10.15%. I base my withdrawals off the current account balance and use a WR of 3%. So I feel like my withdrawals have shrunk basically -10.15% since I retired. I have a financial cushion built in but this trend worries me to lose 10% buying power in 6 years. Is anyone else feeling the same way. Have you retirees in the last 10 years been able to keep up with inflation?
There is the general inflation rate and your inflation rate. What is your actual total expenses growth rate of the same period of time?

I only have 3 full years of expenses - each year is less the the previous.
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Old 07-03-2010, 06:45 PM   #10
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I'm really happy for you.
I like to be happy....and I'm happy you're happy he's happy.
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Old 07-03-2010, 08:56 PM   #11
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The last 10 years compare favorably with the worst historical periods, so if your SWR methodology survived those, you can take some comfort from that. I know I am.
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Old 07-04-2010, 03:32 PM   #12
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It's possible if the nominal return was +2.42% over the entire six year period (i.e. -- not annualized ROR) and inflation ran approximately 2% per year over that same period.
Yes the numbers are a 6 year total sorry for the confusion
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Old 07-04-2010, 03:59 PM   #13
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I admit to total confusion about this thread, but it did prompt me to look at our real returns over the last five years. We had a 3.8% average annual return on our 45/45/10 equity/bonds/cash, plain Jane, index funds. During the same time inflation averaged about 2.6%, producing the pitiful real return of 1.2%.
Let's hope things improve.
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