Is making 8% "some what" safely realistic?

[samclem]

Quote:

Originally Posted by accountingsucks I completely disagree with everyone saying 8% is not a reasonable SAFE return OVER THE LONG RUN OF 25+ YEARS.

Maybe you'll get 8% going forward, but the consensus seems to be against anything like that rate in the near term (next 5 or so years). I'm hoping for 5% real return over the next 15 years.

From the OP:

Quote:

I have a problem where I get bored of things really quickly, and am always go go go, so because my money isn't making me any real sort of return right now, I am always looking for the next new thing to happen, which ends up being in the form of spending it.

It's probably just me, but this didn't sound like somebody looking at a 25+ year timeframe.

Quote:

Originally Posted by accountingsucks Given inflation runs around 2% historically I now need my stocks to give me a 2.5% real return over inflation every year to achieve the 8%. Piece of cake in my opinion.

Okay, so that's a different story. If we get to count inflation as return, then all one has to do is maybe buy TIPS (1% real return) and hope that inflation takes off at 7%. "I'm rich!!"

If you're counting inflation as "return" then maybe 8% is possible. But I don't know why anyone would do that.

[clifp]

Perhaps but he said that he $300K save and he is only 23.. Tough to have that kind of money saved at 20-30K a year at his age, unless he shorted the market last year.

[Alan]

Quote:

Originally Posted by clifp Perhaps but he said that he $300K save and he is only 23.. Tough to have that kind of money saved at 20-30K a year at his age, unless he shorted the market last year.

Correct, he did say he had saved $300K (not won it or inherited it or made a bundle in the market).

[W2R]

OK, then apparently he is saving $20K-$30K/month. His profile gives his occupation as VP.

[Alan]

Quote:

Originally Posted by Want2retire OK, then apparently he is saving $20K-$30K/month. His profile gives his occupation as VP.

Joe Biden is in our Forum?

[W2R]

Quote:

Originally Posted by Alan Joe Biden is in our Forum?

Who knew?

[Fantasm]

Hi,
No, I'm not a drug dealer nor am I involved in any illegal activities. I have simply worked hard since I was 15 and I am an executive at a technology company. I spent (lost) a good sum of cash in the past few years on mostly cars and toys due to depreciation and the cost of the places I've been living. I'm on my 13th or 14th car now and I'm only 23! It is sort of an obsession for me, but I've been trying to control it harder.

Being so young is actually quite a bit harder to plan for, because of how many years I do have left (God willing, knock on wood). So that's a lot of ifs and maybes to plan for on top of just the general amount of funds I would need if I were to just stop working in a few years.

[Alan]

Quote:

Originally Posted by Fantasm I spent (lost) a good sum of cash in the past few years on mostly cars and toys due to depreciation and the cost of the places I've been living. I'm on my 13th or 14th car now and I'm only 23! It is sort of an obsession for me, but I've been trying to control it harder.

At 23 you are entitled to have splurged a lot of your money. Many of us have done the same - we just didn't have the same disposal income at that age

It's great that you are now planning for an early retirement - 2016?

[Fantasm]

Quote:

Originally Posted by Alan At 23 you are entitled to have splurged a lot of your money. Many of us have done the same - we just didn't have the same disposal income at that age It's great that you are now planning for an early retirement - 2016?

Yes, my goal and my fathers opinion is that I should try to be retired by 30, or at least in a position where I am FI.
I see that its going to take a lot of work on my own outside of my current employment responsibilities, to ensure that I make the best choices on a continuous schedule (like CD Laddering) to make the most of the saved income and continuing earned income. I definitely want to start taking advantage of compounding as soon as possible.

Perhaps in a few years I will get lucky and we will sell the company and I will get a part of it, hehe. Here's hoping to 'getting a part of it'.
I know I could be FI a lot sooner than 30 if I accepted living on a smaller amount every year ($30,000 maybe?) but I'm attempting to go for at least $120K yearly budget so I don't make too many sacrifices.

[Alan]

Quote:

Originally Posted by Fantasm Yes, my goal and my fathers opinion is that I should try to be retired by 30, or at least in a position where I am FI. I see that its going to take a lot of work on my own outside of my current employment responsibilities, to ensure that I make the best choices on a continuous schedule (like CD Laddering) to make the most of the saved income and continuing earned income. I definitely want to start taking advantage of compounding as soon as possible. Perhaps in a few years I will get lucky and we will sell the company and I will get a part of it, hehe. Here's hoping to 'getting a part of it'. I know I could be FI a lot sooner than 30 if I accepted living on a smaller amount every year ($30,000 maybe?) but I'm attempting to go for at least $120K yearly budget so I don't make too many sacrifices.

Have you used any RE calculators to see what you need to do be FI at 30, with an annual budget of $120K? I would expect that you'd need about $4M to generate $120K/year at a 3% withdrawal rate, before taxes, so you are going to have to be extremely aggressive in saving and/or cut back on your spending targets or work a few more years.

[eridanus]

Quote:

Originally Posted by Alan Have you used any RE calculators to see what you need to do be FI at 30, with an annual budget of $120K? I would expect that you'd need about $4M to generate $120K/year at a 3% withdrawal rate, before taxes, so you are going to have to be extremely aggressive in saving and/or cut back on your spending targets or work a few more years.

Saving $25k/month over 7 years gives us $2.1MM. Adding in the $600k (doubled over 7 years, if you're lucky), gives us $2.8MM. A 3% withdrawal rate gives about $80k income before taxes. Yep, Fantasm, you'd better hold off on a new car or 2.

[mews]

Quote:

Originally Posted by Fantasm I see that its going to take a lot of work on my own outside of my current employment responsibilities, to ensure that I make the best choices on a continuous schedule (like CD Laddering) to make the most of the saved income and continuing earned income. I definitely want to start taking advantage of compounding as soon as possible.

Hi there, Fantasm!

I bolded part of your post -

Remember, the 'dither factor' can kill you - a pretty good choice, made, followed up on, and tweaked as needed, is better than perfection late-late-late!

Get what you can into tax-advantaged accounts, including a ROTH IRA.

Save the rest in funds that aren't churned, generating excessive taxes.

Have some fun - but maybe find a cheaper hobby than really neat cars. But I will admit they are shiny and cool!!


ta,
mew

[kyounge1956]

Quote:

Originally Posted by mews Hi there, Fantasm! I bolded part of your post - Remember, the 'dither factor' can kill you - a pretty good choice, made, followed up on, and tweaked as needed, is better than perfection late-late-late! Get what you can into tax-advantaged accounts, including a ROTH IRA. Save the rest in funds that aren't churned, generating excessive taxes. Have some fun - but maybe find a cheaper hobby than really neat cars. But I will admit they are shiny and cool!! ta, mew

Isn't fantasm's income a wee bit over the limit for Roth IRA eligibility?

[W2R]

Quote:

Originally Posted by Fantasm Hi, No, I'm not a drug dealer nor am I involved in any illegal activities. I have simply worked hard since I was 15 and I am an executive at a technology company. I spent (lost) a good sum of cash in the past few years on mostly cars and toys due to depreciation and the cost of the places I've been living. I'm on my 13th or 14th car now and I'm only 23! It is sort of an obsession for me, but I've been trying to control it harder. Being so young is actually quite a bit harder to plan for, because of how many years I do have left (God willing, knock on wood). So that's a lot of ifs and maybes to plan for on top of just the general amount of funds I would need if I were to just stop working in a few years.

Thanks for satisfying our curiousity - - you are doing wonderfully well for someone just 23 years old. Yes, it must be much more difficult to plan as you could have 50-75 more years ahead of you.

[Meadbh]

Quote:

Originally Posted by Fantasm Hi, No, I'm not a drug dealer nor am I involved in any illegal activities. I have simply worked hard since I was 15 and I am an executive at a technology company. I spent (lost) a good sum of cash in the past few years on mostly cars and toys due to depreciation and the cost of the places I've been living. I'm on my 13th or 14th car now and I'm only 23! It is sort of an obsession for me, but I've been trying to control it harder. Being so young is actually quite a bit harder to plan for, because of how many years I do have left (God willing, knock on wood). So that's a lot of ifs and maybes to plan for on top of just the general amount of funds I would need if I were to just stop working in a few years.

Well, good for you! One thing though.....you are definitely an outlier (in a good way) when it comes to personal income and net worth for your age. I'm sure you have worked very hard for this and are very talented, but luck must also have played a part. It would be amazing to remain equally lucky in the long term. You need to plan for lean years and reversion to the mean, both during and after your working life. Heck, how many cars does one person need?

[Zathras]

Alan raises a good point. While an annual budget of 120k is no sweat for you now, if you want to maintain that into retirement it would require a hefty nest egg.
While 'getting a part of it' would also be a wonderful windfall (it sounds like) don't plan on that being there. It is far easier to fold that into your planning if it does come through, than readjust your plan if it fails to come through.
Congratulations on your success and bright future

[Milton]

Quote:

Originally Posted by Fantasm I have a problem where I get bored of things really quickly, and am always go go go, so because my money isn't making me any real sort of return right now, I am always looking for the next new thing to happen, which ends up being in the form of spending it.

Chasing the highest current returns is usually a prescription for "buy high, sell low".

Quote:

Originally Posted by Fantasm I am adverse to locking the money away for the long term as I want to see it getting immediate returns which always leads me back to the thoughts of investing in my own businesses ideas or angel investing as those are the fastest and largest methods of earning a return.

There are plenty of former professional athletes who earned huge salaries when they were young, but wound up with low (or zero) net worth (e.g., "Within five years of retirement, an estimated 60% of former NBA players are broke"). Some of them snorted the money up their noses or blew it on fancy cars, houses, etc.; but the majority wasted their savings on dubious, illiquid private investments.

[FinanceDude]

Back to making 8% "safely and realistically"............uh...........maybe...... ...

Realistically? Yes.........

Safely? Depends on whatcha call "safe"........

[Fantasm]

Hi,
It doesn't look like Vanguard has office locations like Ameritrade or Schwab does, how would I go about meeting with someone who can advise me on which of their funds / programmes would be best for me?

[brewer12345]

You do have a telephone, right?

Seriously, most of the advice you get is dubious at best. Every time I call Schwab to trade a bond, it is extremely clear that I know more than the folks on the other side of the line about corporate credit. Spend a little time educating yourself and cut out the middle man. Or else put it in something like the STAR fund and forget it for 20 years.