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03-23-2015, 09:30 PM
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#21
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Full time employment: Posting here.
Join Date: Jan 2008
Posts: 757
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2.95% real based on "Cautious" spending using ESPlanner Monte Carlo. AA of 55/35/10.
__________________
Retired July 2013 at age 49.
Lazy Portfolio Investor:
AA: 55% Stocks
35% Bonds
10% Cash
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03-23-2015, 10:43 PM
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#22
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Thinks s/he gets paid by the post
Join Date: Jun 2010
Posts: 2,301
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Quote:
Originally Posted by Big_Hitter
For what purpose am I making this guess?
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Without making an estimate of your expected returns, how do you know if your AA can meet your long term goals?
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03-24-2015, 02:39 AM
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#23
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gone traveling
Join Date: Oct 2007
Posts: 1,135
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80/20 asset allocation. The 20% is mostly cash not bonds. On this AA I assume annual 5.25% return. Inflation is set at 2.75% thus
a real return of 2.5%.
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03-24-2015, 02:42 AM
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#24
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gone traveling
Join Date: Oct 2007
Posts: 1,135
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Quote:
Originally Posted by braumeister
All my projections have always used a 1% real return. So far, I've been happily surprised every year.
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Wow. That's sobering.
What withdraw rate and how long does the portfolio last at just 1 percent real return?
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03-24-2015, 04:01 AM
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#25
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Recycles dryer sheets
Join Date: Oct 2012
Posts: 60
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My AA is 65/30/5 (lazy portfolio) and I plan using a 2% real return. I'd rather be pleasantly surprised with a good return year!
Sent from my iPhone using Early Retirement Forum
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03-24-2015, 07:25 AM
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#26
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Recycles dryer sheets
Join Date: Nov 2014
Posts: 198
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Quote:
Originally Posted by Meadbh
I use 5% nominal, 2% real return, because it is a conservative estimate of past returns on a balanced portfolio, and lower returns are likely in the future.
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+1, based on an 65/10/25 Stock/RE/Fixed portfolio
Actually, I forecast a negative 8.75% return in year 1, followed by four years of positive 8.75% (then repeated) and that provides a 5% nominal return over every five years. This prepares me for the next correction and (recently) allows my portfolio to happily exceed Year 1 expectations.
__________________
ER'd 6/5/2015 at age 58. DW retired 6/18/2021 with small pension and SS. Planned WR before my SS (2024-2026) is 4-5%, then we will start my SS and a lower WR at age 70 (2027)
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03-24-2015, 07:33 AM
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#27
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,015
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Quote:
Originally Posted by photoguy
Without making an estimate of your expected returns, how do you know if your AA can meet your long term goals?
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During accumulation phase, probably important.
I don't think it's necessary to look at expected returns in retirment (when withdrawing). For that we choose an AA that has good survival characteristics and that we can live with (i.e. Sleep at night)
__________________
Retired since summer 1999.
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03-24-2015, 07:37 AM
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#28
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Recycles dryer sheets
Join Date: Sep 2012
Posts: 58
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at current levels
stocks 5%
bonds 3%
inflation 1.5%
savings 1%
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03-24-2015, 08:00 AM
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#29
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2013
Location: Les Bois
Posts: 5,761
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Quote:
Originally Posted by photoguy
Without making an estimate of your expected returns, how do you know if your AA can meet your long term goals?
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oh, this is for personal reasons?
my "go forward" AA is 70/15/15 - should be 4-5% ish real rate of return
my "rollover" AA is 50/10/40 - should be 3-4% ish real ror
__________________
You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
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03-24-2015, 08:12 AM
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#30
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Full time employment: Posting here.
Join Date: May 2011
Location: Twin Cities
Posts: 523
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I use a 2.5% real return.
I feel pretty confident about that number as over 1/3 of my return is made up of rental properties that are returning 10% and should be somewhat inflation protected as rents tend to rise with inflation.
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03-24-2015, 09:03 AM
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#31
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Recycles dryer sheets
Join Date: Jul 2012
Posts: 407
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I'm planning with a hair over 4% real for a 70/20/10 portfolio, but hope for slightly more.
__________________
I am willing to perform services in exchange for currency. For now.
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03-24-2015, 09:09 AM
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#32
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Recycles dryer sheets
Join Date: Jul 2012
Posts: 407
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Quote:
Originally Posted by Fishingmn
I use a 2.5% real return.
I feel pretty confident about that number as over 1/3 of my return is made up of rental properties that are returning 10% and should be somewhat inflation protected as rents tend to rise with inflation.
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You expect 2/3 of your portfolio to not even keep up with inflation? That strikes me as overly pessimistic.
__________________
I am willing to perform services in exchange for currency. For now.
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03-24-2015, 09:32 AM
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#33
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Recycles dryer sheets
Join Date: Jan 2012
Location: Colorado
Posts: 254
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Quote:
Originally Posted by braumeister
All my projections have always used a 1% real return. So far, I've been happily surprised every year.
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+1
__________________
Don't you know that dynamite always blows down ? --- Moe to Curly
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03-24-2015, 10:28 AM
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#34
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Thinks s/he gets paid by the post
Join Date: Jul 2012
Location: Texas
Posts: 3,024
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My retirement spreadsheet assumes 4.4% nominal and 2.6% inflation, so 1.8% real. AA is in my signature. The 4.4% is based on Rick Ferri's 30-year asset class expectations matched to my portfolio (as best I can), plus a 1.5% haircut across the board. I expect we'll do much better than that. I use this spreadsheet for tax planning and withdrawal strategy what-if's, but I prefer FIRECalc and ******** for estimating portfolio survival probability.
__________________
Retired at 52 in July 2013. On to better things...
AA: 85/15 WR: 2.7% SI: 2 pensions, SS later
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03-24-2015, 11:01 AM
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#35
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,474
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Like Audrey, I don't pay as much attention to expected returns in retirement as I did during accumulation phase. In retirement I chose an AA that I can stick to no matter what.
Before I retired I was using 2% or 3% real return in my computations. That far underestimated my real return during the first five years of my retirement, but then with this boom market one might expect that to be the case.
Now that I am retired there is no point in computing portfolio growth; whatever it is, I'll have to work within that version of reality because I don't plan to work again. That said, it looks like possibly I might be fine even with 0% real return or a little less. In retirement I have not been spending every last cent that I could spend, not out of an excess of frugality but simply because I am happy with my present lifestyle and the way things are right now.
But then, I am glad that I have a little leeway because no major repairs or other financial hazards have occurred so far during the first five years of my retirement.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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03-24-2015, 11:04 AM
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#36
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gone traveling
Join Date: Oct 2007
Posts: 1,135
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Quote:
Originally Posted by Cobra9777
4.4% nominal and 2.6% inflation, so 1.8% real.
The 4.4% is based on Rick Ferri's 30-year asset class expectations matched to my portfolio (as best I can), plus a 1.5% haircut across the board.
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So a 45% buffer? 1.8% real vs 3.3% real is quite a difference !!!
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03-24-2015, 11:24 AM
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#37
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Full time employment: Posting here.
Join Date: May 2007
Posts: 881
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Hi palo,
My expected return depends on my mood at the time (from greedy to fearful and points between); just change the number on the ol' spreadsheet. Generally, I'm very conservative: the current number in the spreadsheet is 2.6%. Is that right? Who knows. Check this 2014 article for a variety of forecasts (scroll down): Expected returns: Estimates for your financial planning
Good luck!
__________________
"It is better to have a permanent income than to be fascinating". Oscar Wilde
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03-24-2015, 11:27 AM
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#38
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2011
Location: NC Triangle
Posts: 5,807
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While working, I targeted 7% annual return for my retirement portfolio. Now I use 6%.
I don't use safe withdrawal rates for projections (nothing against them), instead a "target annual amount" based on a percentage of my salary, adjusted yearly for 3% inflation.
__________________
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03-24-2015, 11:38 AM
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#39
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Thinks s/he gets paid by the post
Join Date: Jul 2012
Location: Texas
Posts: 3,024
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Quote:
Originally Posted by papadad111
So a 45% buffer? 1.8% real vs 3.3% real is quite a difference !!!
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Here's the pertinent portion of my post that you omitted:
Quote:
Originally Posted by Cobra9777
I expect we'll do much better than that.
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Again, for portfolio survival estimates, I prefer FIRECalc and ********. For tax planning and withdrawal strategy what-if's, I have to make an assumption, so I use 1.8% real. In practice, I usually test what-if's against a wide range of real returns, and I only tie to Ferri's data as an independent comparison point. But yeah, as I've said in other threads, once I've got a few more years of ER experience and start gaining confidence, I'll probably loosen the purse strings, as it looks like the kids are going to make out like bandits.
__________________
Retired at 52 in July 2013. On to better things...
AA: 85/15 WR: 2.7% SI: 2 pensions, SS later
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03-24-2015, 11:48 AM
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#40
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Full time employment: Posting here.
Join Date: May 2007
Posts: 881
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Quote:
Originally Posted by W2R
... I don't pay as much attention to expected returns in retirement as I did during accumulation phase. ...Now that I am retired there is no point in computing portfolio growth; whatever it is, I'll have to work within that version of reality because I don't plan to work again. ... But then, I am glad that I have a little leeway because no major repairs or other financial hazards have occurred so far during the first five years of my retirement.
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Hi W2R,
Maybe in your situation you don't need to pay attention to returns in retirement, but I think many do in order to keep pace with inflation. One doesn't need to work to watch expected returns: it's more a matter of allocation. Agree?
And, BTW, you're due for a major repair/financial hazard!
__________________
"It is better to have a permanent income than to be fascinating". Oscar Wilde
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