Reply to How much to retire at age 55? We are 50

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]According to Standard and Poor's, the average annualized return of the S&P index, which later became the S&P 500, from 1926 to 2020 was 10%. At 10%, you could double your initial investment every seven years (72 divided by 10). In a less-risky investment such as bonds, which have averaged a return of about 5% to 6% over the same time period, you could expect to double your money in about 12 years (72 divided by 6).[/quote]

I think money doubling every 7 years is realistic during your working years when you are mostly in equities, you are contributing money to your savings, you are not withdrawing cash, you are not paying taxes on forced withdrawals (RMD).  In retirement, you are likely not 100% equities, not contributing, withdrawing money for expenses/forced to withdraw and pay taxes.  5% net worth appreciation on average is more reasonable IMHO and not conservative at all.  That's 14.4 years to double your net worth.  Actual return would be higher (6-9%) to account for withdrawals and taxes on RMDs.[/quote]

I don't see really moving from all in on equities -- maybe a little 80-20?.  Forced withdrawals don't come for a while.  You have also likely paid most of the taxes on non-retirement assets.  [/quote]

Sure but reality is your portfolio will never track the market unless you are 100% invested in an Index clone.  If you had a large position in Amazon, it went nowhere in 2021, but could take off in 2024 when the market index is flat. Your portfolio mix will drive actual returns.

While taxes have been paid on non-retirement assets, your retirement assets (401K, IRA) are pre-tax and a lot of people have upto 50% of their net worth in those vehicles.  Even assuming it's 30%, and a 22% federal and 5% state tax, you are talking about that bucket of money getting reduced by about 25%. Your overall net worth should be reduced by 7.5% to reflect that.  [/quote]

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