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Annual percentage of Growth for 401k.
Old 02-16-2013, 08:50 AM   #1
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Annual percentage of Growth for 401k.

I have been looking at how to retire by age 55. As I am running the typical retirement calculators (or just making my own excel spreadsheet for it) I have been thinking about the variables that need to be entered such as the percentage increase you apply to your 401k plan. Many sites say if you are in agressive funds estimate 7%, moderate 5% and conservative 3%. I am thinking though that this is totally arbitrary. What would you estimate? I have been using 3% even though I am investing aggressively.
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Old 02-16-2013, 09:00 AM   #2
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In my pre-retirement projections, I used the actual earliest-to-date historical performance of my particular portfolio from my 401k statements. IIRC, this was about 7.6% as I neared retirement.
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Old 02-16-2013, 09:05 AM   #3
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To begin with it is all just a guess. However, what sort of funds are your 401k invested in? I would look at the long term history of those funds (say 5 or 10 year returns) and then round down.

For my retirement planning, I use a nominal return assumption of 5.5% for a 60/40 portfolio. The long term history is over 8% for a 60/40 portfolio and I have shaved off a couple points to be conservative. If it is better than 5.5%, I'll be happy.

Off-the-cuff 3% seems way too conservative for "aggressive" investments.
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Old 02-16-2013, 09:14 AM   #4
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Off-the-cuff 3% seems way too conservative for "aggressive" investments.
Maybe so...my intent was to make me "feel" like I needed to stash away more money to meet my goals. If I hit them early then great.

I'll look into what fund I am allowed to invest in. I was 50/50 funds/company stock. I recently sold all the company stock and it is sitting in the JP Morgan Stable Fund until I figure out what to do with it.
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Old 02-16-2013, 10:30 AM   #5
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I estimate 6% for my 85/15 portfolio. I worry that that's too high, but I'm 20 years from retirement so I'm hoping the market acts like it has in the past (though I know past performance.....).

I do like your idea of tricking yourself into saving more. I think I'll go rerun my numbers with a 4% return.
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Old 02-16-2013, 03:41 PM   #6
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Try this, Historical and Expected Returns - Bogleheads, I come up with 4% real on my portfolio using the Rick Ferri table
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Old 02-16-2013, 05:02 PM   #7
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Originally Posted by gsparks2 View Post
In my pre-retirement projections, I used the actual earliest-to-date historical performance of my particular portfolio from my 401k statements. IIRC, this was about 7.6% as I neared retirement.
my post-retirement projections use a nominal 6% return on 60/40 AA
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Old 02-24-2013, 03:36 PM   #8
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I estimate real growth not nominal as I feel like it's much more useful. I typically estimate in the 3-5% range of real growth for aggressive.
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Old 02-27-2013, 03:54 PM   #9
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I just go with the real historical averages over the last 80 or so years... then I remove 3% for worst case and plan off of that one. I think that puts my real return around 4.5%, and actual at about 7.5%. Hope is to retire at 55... if historical averages continue forward, I'm looking at 50 or sooner.

I plan to stay 100 stocks until the next bubble... its bound to happen at some point in the next 20 years. As soon as everyone else starts getting excited about stocks, I'll adjust to 50/50.

This strategy seems to drive many others nuts... but I've slept well on it. Even through 2008.
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Old 02-27-2013, 04:50 PM   #10
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OK, I'm the real conservative around here.
Whenever I do my projections, I always figure that my investments will exactly equal the inflation rate of 3.5%. I always do better than that, of course, but this approach lets me completely relax about it.
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Old 02-27-2013, 05:04 PM   #11
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Welcome from another Texan (sort of)

I try to take what I have and live on appx. 2-3% and not touch principal. I figure the inflation will be my "drawdown" from savings...

If / when (23-25 yrs) I get SS, I'll plan on 50% of that...just to be conservative

DW also will get a small pension in 15 years, but that's icing on the cake too.
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Old 02-27-2013, 05:36 PM   #12
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My plan is based on 8% during working years, and 6% during ER.
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Old 02-27-2013, 06:09 PM   #13
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About 1.2% per year in my case.

Quote:
Originally Posted by christrong View Post
I have been looking at how to retire by age 55. As I am running the typical retirement calculators (or just making my own excel spreadsheet for it) I have been thinking about the variables that need to be entered such as the percentage increase you apply to your 401k plan. Many sites say if you are in agressive funds estimate 7%, moderate 5% and conservative 3%. I am thinking though that this is totally arbitrary. What would you estimate? I have been using 3% even though I am investing aggressively.
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