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Using only very conservative investments limits you to only about a 2% inflation adjusted withdrawal rate at best at what i would call a bullet proof success rate.
3% would be iffy.
That would be a mix of short term bonds,tips and cd's.
$1 to $1.5 million is actually low if you want to go for the safest strategy to ensure that you will not outlive your savings.
The best strategy is to amass a level of wealth that allows you to live off of the interest from diversified, relatively safe investments - i.e., as a perpetuity.
And then there are some tax issues...
Furthermore, your rate of return has to take inflation into account. Does anyone really think that $40K at the end of 25 years will buy the same level of goods and services as it did at the beginning?
The only option is to live well below your means and put away a significant chunk of your income in your earning years - and start early, as the benefit of compound interest is maximized by time.
At what allocation? Ill bet its not using cd's,short term bonds and tips as i mentioned. Ill bet its no less then a 50/50 mix of bonds and equities.
Using cd's,tips and short term bonds as per bill bernsteins conservative views he gives 2% a given , 3% may be okay,4% pushing it and 5% do a coin toss.
Last edited by mathjak107; 11-25-2012 at 06:57 PM..
Using 70/30. I know this is where you start talking about "not many can handle that pucker factor" but again I'll be basing my financial decisions on math, not emotion.
40/60 = 100%
50/50 = 100%
60/40 = 98.9%
So basically a portfolio that is 40% stocks, 60% bonds would have survived 98.9% of all 50 year periods historically at a 3% withdrawal rate. I don't think the word "iffy" is what I'd use for that withdrawal rate.
The discusion was about somebody avoiding all risk and their odds of success.
The bill bernstein avoid all risk portfolo in his new book has a 2% bullet proof withdrawal rate and 3% already becoming chancey.it uses zero equities.
Using at least 40 or 50% equities is a different conversation with different results from bills model which is what was being discussed
Having bailed out of the system at 52 and for all intent "retiring" ....has not worked out that well...it started with a small tax problem and a thing called compound interest along with the assumption that every year I worked was lucrative ...well...I am broke- and now ten years later I am still alive....some how I will survive....screw the stupid system...I will live to be 90 - and you know what...people like me have been around for a thousand years and we never really retire...we just dump the system that is about to dump us...Kind of like ditching a girlfriend first if you know what I mean.
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