Reply to Can 29yr old live off $1.5 million w/working?

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[quote=Anonymous][quote]Invest the 1.5 mil in vtsax or VT and withdrawal 3%/yr.  More than enough (45k) to have a decent lifestyle, and even though this guy is a slug, he should be able to date women significantly better than your average woman in the US.

IN THEORY. Look up Sequence of return risks.

Very familiar with sequence of returns lol

What withdrawal rate would you use?[/quote]

For those who don’t know sequence of return risk:

Sarah, a retiree who begins her retirement with a $1 million investment portfolio. Sarah plans to withdraw $40,000 annually for living expenses, adjusting for inflation each year. She has a well-diversified portfolio consisting of 60% stocks and 40% bonds.

Scenario A, the early years of Sarah's retirement experience positive investment returns. The stock market performs well, and her portfolio grows by 8% in the first two years. As a result, her portfolio balance after the second year is approximately $1.166 million.

However, in Scenario B, the sequence of returns is unfavorable. The first two years of Sarah's retirement see negative investment returns, with the portfolio declining by 10% each year. After the second year, her portfolio balance drops to around $810,000.

Even though Sarah will be withdrawing $40,000 each year no matter what, there is sequence risk due to the amount she will be reducing her overall portfolio. In Scenario A, where positive returns occur early in retirement, Sarah's portfolio experiences growth, and she withdraws $40,000 annually. In contrast, in Scenario B, the negative returns in the early years, coupled with annual withdrawals, lead to a more significant reduction in the portfolio balance. For Portfolio A, she would still have over $1,000,000 after the first two years; for Portfolio B, she would at less than $750,000.

How to mitigate sequence risk 😂 Consider working as late as you can in order to contribute more to your retirement account, particularly in your peak earning years.
https://www.investopedia.com/terms/s/sequence-risk.asp

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