“If 4-5% was the expectation, then the 4% withdrawal rule in retirement wouldn’t be safe and neither would even 3%.”

This. Also, if they ACTUALLY expected 4-5%, wtf would they be investing in stocks at all? Pre-pay your mortgage, and just buy a bunch of CDs.

10% is a reasonable estimate. Every time this question comes up, at least half the comments are desperate to tell us that 10% is crazy optimistic. But I’ve been at this through dot com, 9/11, Housing, Ebola, Covid, and tariffs.

I’m sticking with 10%. If it’s suddenly different now, oh well.

To actually answer OP’s question, with $4.5M invested, plus our house paid off, and HHI around 250k, we’re only contributing to get the employer matches. (Some of that change came from inflation.)

I’m typing this from a luxury beachfront suite in the Lesser Antilles.

Anonymous wrote:

Anonymous wrote:10% is insane for a long term average. Investors that have millions or billions to invest, that have access to a lot more investment vehicles than you and lower fees, are told to expect something more in the 6-8% range depending on how aggressive they are. For public employer pension funds, the average eoxected long term return is about 6.7%. The fact you are saying 10% makes you sound very young and not very sophisticated.

10% is without adjusting for inflation, most people assume about 7% give or take when talking about S&P 500 returns after subtracting 3% for inflation. Yeah if you want to be on the conservative side, plan for 4-5%. But it’s not incorrect or stupid to believe 10% is possible. It’s not guaranteed, but also far from unlikely.

If 4-5% was the expectation, then the 4% withdrawal rule in retirement wouldn’t be safe and neither would even 3%.

I think people here just like to be conservative and pessimistic about the markets because it makes them feel smart but this outlook is pretty divorced from reality.

Exactly. Also people let political views cloud their financial perspective. Everyone likes to think that the time they live in is “unprecedented” when in reality literally every generation deals with “unprecedented” events … and the market rolls on. They sit on the sidelines because they think they are smarter than everyone else and can time the market based on domestic and global events.

10% seems a lot more likely than 5 or 6% to me. And I have history on my side.

At some.point you hit a time in life where you shift from capital accumulation to capital preservation. It's an individual choice when that is. Factoring in wealth, age, health, lifestyle, and risk. If OP is in accumulation then the $100k a year helps accumulate. Ironically. if OP starts using that $100k for lifestyle then it might extend the time to shift from accumulate to preserve, and increase the total $ they need in their cash flow portfolio. Over 10 years $1 million plus returns is consumed rather than heling them get to the position of being in capital preservation/low risk AND adequate cash flow indefinitely to keep lifestyle while not working/earning (i.e., Retire!).

Unless they have some major liquidity event in the future like selling a business that pushes them well beyond the level of liquid cash flow investments where the risk of remaining in accumulate doesn't matter because no matter how big a drop, or how late, or how long, it won't impact lifestyle or end of life care, they should save the $ now. There's actually more risk in life than in the markets... you or family becoming ill, losing jobs, not having that "extra" $100k to save... if you are left of the "could retire now" finish line and have that $100k to save, then save it.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Why are people LOLing the 10% average annual return? That’s absolutely been the case for a very very long time.

Because the average doesn't matter when the market crashes 20%. Or you have years of stagnation. Or you have high inflation.

Nobody should plan on 10%.

Really? I started contributing to the max that I could to a 401k in 1988 when I joined Biglaw. I retired early in 2015. My entire portfolio was in the S&P 500 the entire time.

The S&P 500 returned an average of 11.09 percent for the 27 years that I worked, and since retiring ten years ago it's returned on average over 12 percent a year. So, for me at least, we're talking well over 10 percent per year on average for the last 37 years. That's a looong time. If I got a dime for every time I read that I was making a mistake -- and invested in the market -- I'd be even richer.

And you think that you will receive similar returns in the future?

Why are you so confident in the S&P 500 and why didn't you invest in an asset class that smoked the S&P 500?

Anonymous wrote:I'm not one of the doomsdayers who is going to say Remember 2008? But remember 2008 ha ha.

2008 was nothing. How about 1968 to 1982 or so. It's called "stagflation," and we may well be headed there now.

Anonymous wrote:We are able to save around 100k a year right now with current incomes and have a net worth of 1.5M. The stock market returns 10% on average, so avged out this 1.5M would grow by 150k on its own which is already more than we contribute every year. If had 5M, it would grow an average of 500k. This is 5x our contribution rate.

At some point doesn’t it kind of feel pointless put more money into your account unless your income keeps scaling with your net worth? TBH if we had 5M which isn’t quite enough to retire I might redirect that 100k of earned income into something else like a sports car or fancy vacations, and just let the 5M compound. At this level your growth is more about market performance and not 9-5 salary.

Obviously I know 10% is just a long term average and it doesn’t mean a steady 10% every year, some years it might be up or down by 20%+. But it’s averaged 10%.

Are you 25 or 65? We don't have enough information, OP.

Anonymous wrote:10% is insane for a long term average. Investors that have millions or billions to invest, that have access to a lot more investment vehicles than you and lower fees, are told to expect something more in the 6-8% range depending on how aggressive they are. For public employer pension funds, the average eoxected long term return is about 6.7%. The fact you are saying 10% makes you sound very young and not very sophisticated.

Not true. There are people who can double money yearly. People with lot of money can take all kinds of risks. Some do it and some are not interested at all as they have enough. I double my money in 2004 and already again 2005, after making several mistakes.
2005 one came even faster as I had experience. I ignored that it couldn't be done. It's easy actually.

I get that. We have $15m NW (about $4.5m of it tied up in houses, so it's not all liquid), and I keep adding more to it. But now I am much more willing to spend money than just focus on saving. But if I were at $1.5m I'd still be saving aggressively.

Anonymous wrote:

Anonymous wrote:I kinda get what OP is saying even though I don't see it that way. yes, the old money makes a lot more than any new money you put in. we have about 6 mil in the market now but still continue to put in up to the limits. today's money will make money 30 years down the road.

I was sort of thinking this earlier this week. We do not really feel wealthy (I don’t mean that in the humblebrag way but how we have always felt in terms of not having huge amounts of extra money). But we have been saving in retirement, maxing out as much as possible, since age 22. In the last 10 years also brokerage accounts. Now we are almost 50. Our older money is doing so much work right now, and it does feel like the newer money won’t be as productive.

I never thought I would have what I have. I hope my kids and other young people understand and really just push through on saving early. For so long, it felt like it wouldn’t be enough and then all of a sudden it felt like so much growth. I know I’m simplifying but hopefully you know what I mean.

When the market does +20% in one year all I think is how jealous I am of people with 8 figures invested who just made millions in a single year from doing nothing

Anonymous wrote:

Anonymous wrote:I kinda get what OP is saying even though I don't see it that way. yes, the old money makes a lot more than any new money you put in. we have about 6 mil in the market now but still continue to put in up to the limits. today's money will make money 30 years down the road.

I was sort of thinking this earlier this week. We do not really feel wealthy (I don’t mean that in the humblebrag way but how we have always felt in terms of not having huge amounts of extra money). But we have been saving in retirement, maxing out as much as possible, since age 22. In the last 10 years also brokerage accounts. Now we are almost 50. Our older money is doing so much work right now, and it does feel like the newer money won’t be as productive.

I never thought I would have what I have. I hope my kids and other young people understand and really just push through on saving early. For so long, it felt like it wouldn’t be enough and then all of a sudden it felt like so much growth. I know I’m simplifying but hopefully you know what I mean.

Yes, you need to wait until your new money is benefited by "time in the market."

Anonymous wrote:10% is insane for a long term average. Investors that have millions or billions to invest, that have access to a lot more investment vehicles than you and lower fees, are told to expect something more in the 6-8% range depending on how aggressive they are. For public employer pension funds, the average eoxected long term return is about 6.7%. The fact you are saying 10% makes you sound very young and not very sophisticated.

10% is without adjusting for inflation, most people assume about 7% give or take when talking about S&P 500 returns after subtracting 3% for inflation. Yeah if you want to be on the conservative side, plan for 4-5%. But it’s not incorrect or stupid to believe 10% is possible. It’s not guaranteed, but also far from unlikely.

If 4-5% was the expectation, then the 4% withdrawal rule in retirement wouldn’t be safe and neither would even 3%.

I think people here just like to be conservative and pessimistic about the markets because it makes them feel smart but this outlook is pretty divorced from reality.

No one budgets 10% across the board. Come on.

10% is insane for a long term average. Investors that have millions or billions to invest, that have access to a lot more investment vehicles than you and lower fees, are told to expect something more in the 6-8% range depending on how aggressive they are. For public employer pension funds, the average eoxected long term return is about 6.7%. The fact you are saying 10% makes you sound very young and not very sophisticated.

Anonymous wrote:I kinda get what OP is saying even though I don't see it that way. yes, the old money makes a lot more than any new money you put in. we have about 6 mil in the market now but still continue to put in up to the limits. today's money will make money 30 years down the road.

I was sort of thinking this earlier this week. We do not really feel wealthy (I don’t mean that in the humblebrag way but how we have always felt in terms of not having huge amounts of extra money). But we have been saving in retirement, maxing out as much as possible, since age 22. In the last 10 years also brokerage accounts. Now we are almost 50. Our older money is doing so much work right now, and it does feel like the newer money won’t be as productive.

I never thought I would have what I have. I hope my kids and other young people understand and really just push through on saving early. For so long, it felt like it wouldn’t be enough and then all of a sudden it felt like so much growth. I know I’m simplifying but hopefully you know what I mean.