What do you think?

[Brianeboatman]

I'm 38 and have 17.5 years in Nevada PERS. I have actually worked 12.5 and purchased 5 for approximately $100k. I currently have $20,000 in my 457 Plan and contribute, between my wife and I, $3,500 per month into her 403(b) and my 457. We want to retire FOR GOOD at 50, 12.5 years from now. Is it unrealistic to expect an 8% return on our Vanguard 2045 Target Date Funds? If all goes well, we will have approximately $55,000 per year in pension at 50 years old and $800,000 in our retirement accounts. There is also a COLA with my pension. Everything look on track? Have any advice? Fyi, we plan to spend approximately $75k per year in retirement, house payment included.


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[samclem]

Is it unrealistic to expect an 8% return on our Vanguard 2045 Target Date Funds?

Sorry, but IMO 8% real or nominal annual return is probably higher than we'll get over the next decade, based primarily on present stock valuations. Do some Googling and checking this board--I think many here are counting on less than 4% real return over the next decade or so.

Fyi, we plan to spend approximately $75k per year in retirement, house payment included.

Today's dollars, or "then year" dollars? What is your assumption for inflation? And, does that $75K include "spending" for taxes?

 

[nash031]

I plan using 6% nominal return, which I figure is 3-4% real. 8% is too high IMO, but I'd rather plan conservatively. Others probably plan even moreso.

 

[hnzw_rui]

An 8% nominal return? Quite possible. However, same as others, I think 8% real return is pretty optimistic. I use 3% for my projections. Also, isn't the Target 2045 fund kinda aggressive for someone retiring in 12.5 years? Iirc, that's currently at 90% stock/10% bond and will be around that allocation for the next few years.

 

[gcgang]

http://www.researchaffiliates.com/assetallocation/Pages/Core-Overview.aspx

Indeed, 8% may be unattainable due to current low interest rates and high stock valuations. Above from Rob Arnotts Research Affiliates forecasts 0.7% real returns for US stocks and bonds.

Good luck.


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[hnzw_rui]

Asset Allocation Website

Indeed, 8% may be unattainable due to current low interest rates and high stock valuations. Above from Rob Arnotts Research Affiliates forecasts 0.7% real returns for US stocks and bonds.

Ouch. That's not a comfy thought.

...Then again, a sale on stocks would actually benefit me since I'm still in accumulation.

 

[Willers]

http://www.researchaffiliates.com/assetallocation/Pages/Core-Overview.aspx

Indeed, 8% may be unattainable due to current low interest rates and high stock valuations. Above from Rob Arnotts Research Affiliates forecasts 0.7% real returns for US stocks and bonds.

Good luck.


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Wow. I'm using 1.5% real and I thought I was being a pessimist. These guys make me look like a crazy bull.



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[steelyman]

The inflation rate is a wild card that's a stat like unemployment with estimates all over the map. I use 3% annually for my "spreadsheet projections" and subscribed to get updates by email on CPI-U from BLS (Bureau of Labor Statistics), which are infrequent.

It was slightly above 3% the year I stopped working, 2011.

 

[daylatedollarshort]

I don't have a crystal ball, but I think stocks, bonds and housing are in bubble territory that is going to pop before too long. The good news is I think interest rates will go back up, so we're just trying to stick to investments that won't get hurt too much when the bubbles pop and can take advantage of rising interest rates. We're using 1% real in our spreadsheets, will be fine at 0% real and anything above that will be party time.

Asset Inflation, the Ironic Result of Fed Policies - Barrons

"The boost to wealth and consumer confidence has accrued almost exclusively to the 52% of Americans who own stocks, based on a Gallup survey. It has not flowed through to jobs as the employment-to-population ratio has remained at 58.6% of the working-age population, within tenths of a percent of the recession low.....Will the Fed recognize its actions feed into inflation of asset prices more than employment and wages?"