Reply to Is saving/investing actually a crappy way to get rich?

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[quote=Anonymous][quote=Anonymous][quote]In the calculator, I assumed 8% returns, 3% inflation, and a 15% tax rate on my investments. [/quote]

Your assumptions are incredibly conservative. Long term annual returns on the S and P run a bit over 10%, and inflation runs about 3%. Federal Reserve target is 2%, so 3% is conservative enough. If you are putting the money into your brokerage account, it will just sit there growing. Capital gains in index funds like S and P are negligible as there is not much buying and selling. No need to tax adjust this growth.

So I would look at annual inflation adjusted growth of 7%, instead of the 5% you are assuming. You will not pay the taxes until you withdraw, so it makes sense to reduce withdrawals by 15% if you are trying to get to income after taxes.[/quote]

NP -- fwiw, I typically assume 5 percent growth on my investments because if I'm going to be surprised when I retire, I'd rather have it be "I have more money than I thought I would" than "I don't have enough money." But I'm also not doing much with those calculations other than just reassuring myself that I'm saving enough; I don't have plans to retire at 52 or whatever like some PPs.[/quote]

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