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Old 06-11-2008, 10:29 AM   #41
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If it is for planning purposes I personally would use something closer to 6% (I actually use 5% currently) and adjust it up (or down) for the near term (1-5 years). Nice to use the higher rates and watch the numbers grow 20 to 30 years out; but how realistic is that if the current rates are closer to a much lower rate? Currently, at 68 years old we pull about 1.5% out of the "nestegg" but we have two good COLA'd annuities so that must be factored in.
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Old 06-11-2008, 10:49 AM   #42
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Quote:
Originally Posted by R Wood View Post
If it is for planning purposes I personally would use something closer to 6% (I actually use 5% currently) and adjust it up (or down) for the near term (1-5 years). Nice to use the higher rates and watch the numbers grow 20 to 30 years out; but how realistic is that if the current rates are closer to a much lower rate? Currently, at 68 years old we pull about 1.5% out of the "nestegg" but we have two good COLA'd annuities so that must be factored in.
Maybe I'll withdraw 1.5% too. I haven't really decided. Withdrawals as low as 0.5% plus pension and SS would exceed my current (pre-windfall) level of spending, and I'm not really sure I can figure out how to spend as much as 3%. So, I have a very conservative AA and will be pretty free to vary my withdrawal percentage depending on the market and inflation, if I want to.

The prospect of having my portfolio grow substantially while I spend whatever I want would be ideal. I don't know if things will work out that way, but hey, it's worth a daydream or three.
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Old 06-14-2008, 04:04 AM   #43
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I use 10% for equities, 6% for bonds, and 3% for cash...which are the only 3 asset classes I use. From there you can calculate a mixed return rate as follows:

Example for me at age 46:
80% stocks x 10% = .08
10% bonds x 6% = .006
10% cash x 3% = .003

.08 + .006 +.003 = 8.9%

As I approach rehirement at age 53, I'll likely be more like 40% stocks, 40% bonds, 20% cash, so my rate would be more like 7.6%.

Historical returns are one marker...but it depends on which period you select. From 1963 - 1993, the broad market returned 11.8%/year.

For the S&P, rates are slightly lower, as they exclude small, growth-oriented companies....see here Fun with Compounded Annual Growth Rates (CAGR).

Within my stocks, I hold about 60% large cap, 20% growth, and 20% international....which is why i use 10%.

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Old 06-14-2008, 09:10 AM   #44
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For the S&P, rates are slightly lower, as they exclude small, growth-oriented companies....see here Fun with Compounded Annual Growth Rates (CAGR).

Within my stocks, I hold about 60% large cap, 20% growth, and 20% international....which is why i use 10%.
Interesting. Most suggestions to tilt that I have read go toward value stocks. Any particular reason to tilt toward growth? Personal preference?
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