Net Worth increases AFTER RETIRE

[Enuff2Eat]

We had an open house at work for retiree co-worker during the holidays. We went to a bar afterward, I talked to a few of them. A bunch of them mentioned that they did NOT really touch their 401K and all told me that their networth increases after the retirement.

I was wondering if those people are exception or the norm. It seems like alot of people are worrying sick about depleting their asset due to inflation...

For example.

If your expense is $50k/yr and you can get 6% return on 1 million dollar porfolio. Now you get $30k pension + $15k social security. How on earth would anyone worrying about depleting their pension?


enuff

 

[Chuckanut]

We had an open house at work for retiree co-worker during the holidays. We went to a bar afterward, I talked to a few of them. A bunch of them mentioned that they did NOT really touch their 401K and all told me that their networth increases after the retirement.

I was wondering if those people are exception or the norm. It seems like alot of people are worrying sick about depleting their asset due to inflation...

For example.

If your expense is $50k/yr and you can get 6% return on 1 million dollar porfolio. Now you get $30k pension + $15k social security. How on earth would anyone worrying about depleting their pension?


enuff

Nine years of a market that goes up, Up and UP will do that for you.

OTOH, had these folks retired into an enraged BEAR market like '74, the story might be different, especially in real terms.

 

[audreyh1]

Retire 1999. Well, in the early 2000s and since 2011 our net worth has increased after retirement, but there was a period in 2008-2009 where it had not, and if inflation is taken into account it was 2012 before we had recovered in real terms.

We don’t plan on tapping into our IRAs until we have to at 70.5 and I assume it will feel like found money.

No pension or SS here. We don’t plan on starting SS until 70 either and it might cover our Meducare premiums plus taxes. Not much left over.

Where are your ideas of 6% on a $1M portfolio coming from? I’m certainly not expecting those kind of returns and don’t don’t want higher than 50% equity exposure in my taxable retirement fund. I’d be thrilled with a 2% real return (so maybe 4% nominal) - I wouldn’t need to worry about running out of money.

 

[Ronstar]

Generally net worth will increase when yearly portfolio return pct exceeds WR by about 1%. I would think that increasing net worth after FIRE is quite common, especially in bull markets.

 

[knucklehead 61]

i retired a little over 2 years ago.
my ira is up over 250k since with zero new cash being deposited & zero withdrawals.
my rental properties combined equity is up about 1.2m during the same time.
my mortgage debt has reduced about 1m as well due to selling a couple mortgaged properties & then paying cash for a bunch more, along with my tenants paying down the principal for me as the rate of 4k+/mo.

 

[JoeWras]

Let's see... I wasn't retired in 2009, I was making good money, and saving quite a bit, and my networth decreased over a year's time.

How did that happen?

 

[RobbieB]

My net worth has increased each year after retirement.

That's why I need to Blow More Dough!

 

[kimcdougc]

We sold our house to daughter and her partner 2 years ago in August. We are now renting her small 800 square foot renovated house, We actually might just keep renting it and not buy another house. We moved into town and love the neighbors and can walk to everything which is very attractive as we get older. Can walk to restaurants, doctors, dentist, the grocery store etc.

When we did own our last 3 houses we never spent what the bank told us we could afford. That is one of the reason's I "retired" at 50 and DH at 57.

Good luck with your decision.

 

[GravitySucks]

Yup. Living off the accounts exclusively for the last four years and it's still 30% higher than the start.
I guess I'll plan on that every five years.

 

[scrabbler1]

I retired at the end of October, 2008, when the markets were crashing. My portfolio, which had been going down since late 2007, kept dropping into early 2009 and the drop included about $70k in income taxes I had to pay when I cashed out the company stock. But, despite those two forces reducing my portfolio, market gains later in 2009 had me back to my 10/2008 level by June. And, by early 2010, I was back to my late 2007 peak despite the tax bill and no wage income after 11/2008. Since late 2010, I am up just over 50% overall.

 

[audreyh1]

I feel a deja vue - I’m pretty sure we had almost exactly this same thread a year or two ago.

 

[GoodWishes]

We retired 2 years ago. First year of retirement, spent major money remodeling (more like rebuilding) our rental house for us to move into. Second year, did our normal projected withdrawal. Porfolio is still up a lot. Just sold some stock to fund the next 2 years of spending.

 

[gerntz]

If most assets aren't in 401, then why would you need to touch it?

 

[Lawrence of Suburbia]

Don't expect that this state of affairs will continue. I bet we'll see a drop in folks' net worths pretty soon. 2008 wasn't a one-off.

 

[FreeBear]

I feel a deja vue - I’m pretty sure we had almost exactly this same thread a year or two ago.

Hopefully, a similar thread will magically re-appear in 2 more years.

 

[Danmar]

Given the very strong markets over the last 9 years it would be quite surprising if a retiree during that period didn’t have more now than when he retired.

 

[flintnational]

In addition to the bull market of the last few years, a 4% SWR actually predicts a growing retirement balance. 4% is predicated on a near worst case historical scenario. The average historical retirement scenario would allow an approximate WR of 6%. However, you only know this after the fact. If you use a 6% WR, historically, a 30 payout period will fail about half the time. So your choice is a conservative WR that will likely lead to growing balances or a risky higher WR that can lead to failure. There is a current thread that talks about ways to increase the WR over time to utilize the increasing balances.

 

[marko]

Don't expect that this state of affairs will continue. I bet we'll see a drop in folks' net worths pretty soon. 2008 wasn't a one-off.

Depends on when you take the data. Yes, in January 2009 my NW was way, way down but in the 12 years since my RE in January 2006 to today my NW has almost tripled. (Despite DW's attempts to lower that number!!)

And I would view return to "2008" as an opportunity to do a lot more bargain hunting than I did back then; I just wasn't savvy enough at the time.

 

[exnavynuke]

A retiree's net worth will increase over-time if they're following a "safe withdrawal rate" method that is conservative (i.e. a "don't touch investment principal" type withdrawal). Most of the frequent posters here seem to use such strategies.

A retiree with a "spend down investments" withdrawal strategy (i.e. principal is needed to be consumed generally to accommodate spending levels) will generally have net worth decrease except in years where investments have better than average returns (when it may increase).

 

[gerntz]

Don't expect that this state of affairs will continue. I bet we'll see a drop in folks' net worths pretty soon. 2008 wasn't a one-off.

Depends on what one means by "continue". Looking 20-25 years forward, I think it will continue - as it has since mid-90's. And unless everyday is higher, of course there are drops with infrequent big drops - nothing new. Unless one's a market timer, NBD.

FYI, hadn't seen Marko's post when I wrote this.

 

[athena53]

Given the very strong markets over the last 9 years it would be quite surprising if a retiree during that period didn’t have more now than when he retired.

I agree. My net worth is up 16.8% since I retired; that's 4.3% annualized. To me, it's just a sign that my portfolio is growing faster than my withdrawal rate, which is how it SHOULD work so I'm protected against inflation. I know this won't always happen but over the long run I expect my balance to grow.

 

[Senator]

Given the very strong markets over the last 9 years it would be quite surprising if a retiree during that period didn’t have more now than when he retired.

Exactly. Anyone that had a decrease in net-worth better brush up their resume, or have a bunch of birthdays real fast.

My LIQUID NW is up 38% over the past 18 months.

 

[JoeWras]

I think a lot of this discussion also summarizes the issue of a time window: short term vs. long term.

One of the surest ways to decrease NW is by selling everything during a short term NW hit. One of my co-workers did this in 2009 and is only getting back in the market now with the current excitement. Yikes! No wonder he hasn't ER'd yet.

 

[Dawg52]

My net worth has increased each year after retirement.

That's why I need to Blow More Dough!

You need to put this in your signature.

 

[street]

My thought would be NW does increase in retirement IF you have a low enough WR. I have been retired for less then 2 years and my NW worth is up 13% even after living expenses. We all know NW changes with times and I don't like to compare NW I look more at my portfolio numbers the investments of money not earthly items.