My financial future in 3 minutes

[Anonymous]

07:33 the return on my investments over the past 5 years has been more like a 25% return, I was making up an average for the next 18 years and came up with 9%.

am I wrong in saying around a 9% return would be expected over the course of 18 years in a 100% risk allocation (stocks)?

[Anonymous]

Dang, if that was dc prices I could own 10 apartment buildings

[Anonymous]

Can I take money out of a 401k so long as I invest it into property? If so is it acceptable to do this with a income property investment? Otherwise, I feel as though I would rather have a lump sum of cash at age 42 to buy homes, over having a roth ira built up for retirement in my 60s. is it wrong for me to think this way?

[Anonymous]

By the way, I wouldn't necessarily count on a pension at 20 years with the military. Changes will be coming and until you reach 10 years+ of service, I wouldn't assume you would be grandfathered in.

Ingestion retirement funds in real estate is a pain--everything has to be kept separate. It's not really worth the trouble. Also, you need to factor in inflation when buying properties in 18 years--$150k is awfully low (even for non DC markets).

[Anonymous]

Anonymous wrote:By the way, I wouldn't necessarily count on a pension at 20 years with the military. Changes will be coming and until you reach 10 years+ of service, I wouldn't assume you would be grandfathered in.

Ingestion retirement funds in real estate is a pain--everything has to be kept separate. It's not really worth the trouble. Also, you need to factor in inflation when buying properties in 18 years--$150k is awfully low (even for non DC markets).

That would be disgusting if they cut military pensions.

[Anonymous]

Anonymous wrote:

Anonymous wrote:By the way, I wouldn't necessarily count on a pension at 20 years with the military. Changes will be coming and until you reach 10 years+ of service, I wouldn't assume you would be grandfathered in.

Ingestion retirement funds in real estate is a pain--everything has to be kept separate. It's not really worth the trouble. Also, you need to factor in inflation when buying properties in 18 years--$150k is awfully low (even for non DC markets).

That would be disgusting if they cut military pensions.

For people looking to retire at age 40?

You really do need to be putting money into a Roth IRA now. All the gains your taxable mutual funds have earned you will be taxed when you start using the funds. If you are making $132k a year or whatever you projected, that puts you in the 28% tax bracket. Who knows what the tax rate is going to be 20 years from now. You are going to need money when you are 59, right? So why not have it be tax-advantaged? If you are so concerned with building wealth over the long term, that is the best way. It's freaking free. You might even qualify for a saver's credit. Don't forget you can always access the principal if you absolutely need to, it's just not recommended because it is like burning money (which is what you are doing now by not investing in a Roth. Another thing to keep in mind: Roth isn't an option once you make over around $120k, so you need to take advantage of this now.

Seriously, each of you should go put $11k into a Roth IRA before April 15th.

[Anonymous]

Anonymous wrote:07:33 the return on my investments over the past 5 years has been more like a 25% return, I was making up an average for the next 18 years and came up with 9%.

am I wrong in saying around a 9% return would be expected over the course of 18 years in a 100% risk allocation (stocks)?

It's absolutely possible. But it's also possible that it's more like 4%-5%. I think 9% is aggressive, 4% is conservative, and a good base case is somewhere in between (plus consider the impact of inflation). I think the broader point is that for long term planning you should also consider the possibility that investment returns aren't what you'd hoped for because as you note, they are risky, and timing matters (ie, when you need to sell). This is why maximizing tax efficiency should be the first thing you nail down.

[Anonymous]

Anonymous wrote:07:33 the return on my investments over the past 5 years has been more like a 25% return, I was making up an average for the next 18 years and came up with 9%.

am I wrong in saying around a 9% return would be expected over the course of 18 years in a 100% risk allocation (stocks)?

Try reading a book where people actually have the numbers figured out over decades. Your response is so naive I feel like it must be fake.

[Anonymous]

Anonymous wrote:07:33 the return on my investments over the past 5 years has been more like a 25% return, I was making up an average for the next 18 years and came up with 9%.

am I wrong in saying around a 9% return would be expected over the course of 18 years in a 100% risk allocation (stocks)?

That's because you invested just after the market crashed and the returns are due to the recovery. Calculate what your 5 year return would be if you started 2-3 years earlier. You have to factor in periodic crashes and recovery which moderates average returns.

The S&P has gone up 18% over the last 5 years. But if you look at 2007-2012 instead of 2009-2014 the return is -4.75. You need a longer term perspective.

[Anonymous]

Anonymous wrote:

Anonymous wrote:07:33 the return on my investments over the past 5 years has been more like a 25% return, I was making up an average for the next 18 years and came up with 9%.

am I wrong in saying around a 9% return would be expected over the course of 18 years in a 100% risk allocation (stocks)?

Try reading a book where people actually have the numbers figured out over decades. Your response is so naive I feel like it must be fake.

Do you have any book recommendations? I'm 24 and honestly have little to no experience in this sort of thing, that is why I came here asking questions, no need to be rude.

[Anonymous]

Dude, this is pretty complicated for DCUM. Have you tried boogleheads.com instead? They have a whole website of folks who will do this analysis for you.

[Anonymous]

^^ Its boogleheads. org, sorry

[Anonymous]

also wouldn't a more accurate rate of return be projected since the inception of the S&P (which is at around 9-10% isn't it)?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:07:33 the return on my investments over the past 5 years has been more like a 25% return, I was making up an average for the next 18 years and came up with 9%.

am I wrong in saying around a 9% return would be expected over the course of 18 years in a 100% risk allocation (stocks)?

Try reading a book where people actually have the numbers figured out over decades. Your response is so naive I feel like it must be fake.

Do you have any book recommendations? I'm 24 and honestly have little to no experience in this sort of thing, that is why I came here asking questions, no need to be rude.

http://www.amazon.com/gp/aw/d/0743228383

http://www.amazon.com/gp/aw/d/0615869068

[Anonymous]

Anonymous wrote:also wouldn't a more accurate rate of return be projected since the inception of the S&P (which is at around 9-10% isn't it)?

You sure are stubborn. Yes dude, fine, use 9%