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Old 06-01-2015, 09:07 PM
 
26,134 posts, read 28,529,259 times
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Quote:
Originally Posted by fumbling View Post
$500,000 is quite a good amount of money back in 1991 but not that much these days, and with the little stock market growth the last 15 years I wonder if their principal has grown or stayed the same. I don't think they would have much social security ... basically they might not be able to afford to come back permanently to the US.
Actually, starting in 1994, 500K invested in 75% Vanguard 500 Stock Market Index and 25% in Vanguard Short Term Bond Index, with a 4% initial withdrawal rate revised upward each year for inflation, rebalanced annually, would now be worth $1,602,930.

2014 Update: Real-Life Retiree Investment Returns

And that's a conservative figure. Stocks and bonds actually had positive returns in the 3 years prior to 1994. Stocks skyrocketed 31% in 1991. It also doesn't account for the fact that Vanguard instituted lower fee "Admiral" share classes in the early 2000s, which would have further added to returns.

So the past 15 years of lousy stock market returns isn't representative of the past 23-24 years. The early 1990s were an ideal time to retire, even with the lousy returns of the last 15 years.

The difference in S&P 500 performance over the last 15 years vs. the last 20 is pretty striking...4.37% vs. 9.23% respectively.

Vanguard 500 Index Inv (VFINX) MUTUAL FUND RESEARCH

The couple in the article do sync up with my previous post where I said most early retirees focus on keeping their housing and transportation costs low. Those two things help people to retire early and help them to keep work optional after they retire. They sold their house and moved from expensive Santa Cruz, California and they travel to cheap, but nice spots in 3rd World countries, where cars are generally not needed. I don't think I would want to live their lifestyle but it clearly works for them.
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Old 06-01-2015, 09:47 PM
 
1,437 posts, read 725,248 times
Reputation: 3729
Quote:
Originally Posted by evilcart View Post
The thing is people are not nearly as bright as they like to think.

I see dumb people everywhere and I am not even that smart, I can only image what the world looks like to the gifted. To be frank I am not completely sure it is reasonable to place blame at the feet of those exposed to a lifetime of brain altered media and poor education.

Well said.....I saw the movie "Idiocracy" I didn't realize it would turn out to be a prophecy, but it sure looks that way.



https://www.youtube.com/watch?v=fJIjoE27F-Q




https://www.youtube.com/watch?v=3boy_tLWeqA
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Old 06-02-2015, 02:31 AM
 
71,706 posts, read 71,829,507 times
Reputation: 49273
Quote:
Originally Posted by mysticaltyger View Post
Actually, starting in 1994, 500K invested in 75% Vanguard 500 Stock Market Index and 25% in Vanguard Short Term Bond Index, with a 4% initial withdrawal rate revised upward each year for inflation, rebalanced annually, would now be worth $1,602,930.

2014 Update: Real-Life Retiree Investment Returns

And that's a conservative figure. Stocks and bonds actually had positive returns in the 3 years prior to 1994. Stocks skyrocketed 31% in 1991. It also doesn't account for the fact that Vanguard instituted lower fee "Admiral" share classes in the early 2000s, which would have further added to returns.

So the past 15 years of lousy stock market returns isn't representative of the past 23-24 years. The early 1990s were an ideal time to retire, even with the lousy returns of the last 15 years.

The difference in S&P 500 performance over the last 15 years vs. the last 20 is pretty striking...4.37% vs. 9.23% respectively.

Vanguard 500 Index Inv (VFINX) MUTUAL FUND RESEARCH

The couple in the article do sync up with my previous post where I said most early retirees focus on keeping their housing and transportation costs low. Those two things help people to retire early and help them to keep work optional after they retire. They sold their house and moved from expensive Santa Cruz, California and they travel to cheap, but nice spots in 3rd World countries, where cars are generally not needed. I don't think I would want to live their lifestyle but it clearly works for them.
it all depends on the time frame you developed substantial assets and not the time frame itself..

as an example the greatest bull market in history was 1987 to 2003 when we had 17 amazing years averaging 14%.

but the years leading up were some of the worst. decades of below average markets and high inflation made life very tough and saving money was rare.

so it was all well and good the greatest bull market started but few had money invested , 401k's didn't exist much prior so you ended up getting lots of gains on very little money.

from the 1990's to the 2,000's you were able to start to gather some steam savings wise but that is when that existing money hit that brick wall and got less than 2% real return going forward over the next 15 years . only new money saw good results but existing money you accumulated had way below average returns inflation adjusted . you really need to always see what happened the time frames prior for a true real life picture and not some point cherry picked out of time..


that return the last 15 years hurt and was quite a set back for many since we were finally getting a nice balance under our belt by 2000 . if you go back a bit further the averages looked good to date but the investment dollars available sucked for the typical american who tried to invest earlier..

this is why looking at average returns on funds is useless.

unless you never added money , never rebalanced , never dollar cost averaged , never spent any money and always had a big balance with no start up time of your investment money you never got those averages , and . even if you did if it may have been only on a tiny part of the money you eventually invested so it means nothing.


it is like today a 7% hit in our balance does not sound like much but it basically wipes away the last 10 years of maxing out my 401k at the catch up rate. that is in contrast to someone first starting out who is down a few hundred dollars and couldn't care less.

sme percentage but drastically different effect.

the time frames that effect the bigger balances count the most and that is what my entire explanation is trying to convey. time frames and averages don't mean a thing. your personal balance percentage wise of your total assets and those time frames mean everything.

Last edited by mathjak107; 06-02-2015 at 03:34 AM..
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Old 06-02-2015, 06:38 AM
 
Location: NC Piedmont
3,911 posts, read 2,881,871 times
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Quote:
Originally Posted by mathjak107 View Post
...
it is like today a 7% hit in our balance does not sound like much but it basically wipes away the last 10 years of maxing out my 401k at the catch up rate. that is in contrast to someone first starting out who is down a few hundred dollars and couldn't care less.

sme percentage but drastically different effect.

the time frames that effect the bigger balances count the most and that is what my entire explanation is trying to convey. time frames and averages don't mean a thing. your personal balance percentage wise of your total assets and those time frames mean everything.
That's the kind of stuff that gives me nightmares. I am late 50s and started the conservative shift in investments but that would still hurt. For those in our age group it is nice what happened to the money we put away early, but for many of the last few years when I have been able to sock away the most I might as well have been stuffing it in a mattress except for the tax savings and small match my employer does. Yes it has come roaring back but I was in when it corrected. I think I will use a much different word than "correction" if it happens in the next few years.
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Old 06-02-2015, 10:00 AM
 
Location: Albuquerque NM
1,661 posts, read 1,528,456 times
Reputation: 3650
Thanks, Mathjak, for the detailed explanation. It helps me feel a little better about my relatively meager 401k (TSP). I started contributing in 1988 but my salary right out of college for the first five years was not that great and from 1987-2000 we were limited to contributing only up to 10% of our salary. At one point in the 2000's, I was hoping that my funds would start that "exponential growth" that everyone talked about but it just never happened with all the market volatility. These days I contribute the maximum, keep a conservative 60/40 allocation, and try to stay diversified although my selection is limited to five index funds. But sometimes I also feel like I could have just stuffed my money in the mattress. However, I'm in decent financial shape and plan to work two more years to increase my pension. My pension has turned out to be the bulk of my retirement although that was not the original plan. I'm lucky to have it!

Last edited by ABQ2015; 06-02-2015 at 10:10 AM..
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Old 06-02-2015, 12:23 PM
 
26,134 posts, read 28,529,259 times
Reputation: 24854
Quote:
Originally Posted by mathjak107 View Post
it all depends on the time frame you developed substantial assets and not the time frame itself..

as an example the greatest bull market in history was 1987 to 2003 when we had 17 amazing years averaging 14%.

but the years leading up were some of the worst. decades of below average markets and high inflation made life very tough and saving money was rare.

so it was all well and good the greatest bull market started but few had money invested , 401k's didn't exist much prior so you ended up getting lots of gains on very little money.

from the 1990's to the 2,000's you were able to start to gather some steam savings wise but that is when that existing money hit that brick wall and got less than 2% real return going forward over the next 15 years . only new money saw good results but existing money you accumulated had way below average returns inflation adjusted . you really need to always see what happened the time frames prior for a true real life picture and not some point cherry picked out of time..


that return the last 15 years hurt and was quite a set back for many since we were finally getting a nice balance under our belt by 2000 . if you go back a bit further the averages looked good to date but the investment dollars available sucked for the typical american who tried to invest earlier..

this is why looking at average returns on funds is useless.

unless you never added money , never rebalanced , never dollar cost averaged , never spent any money and always had a big balance with no start up time of your investment money you never got those averages , and . even if you did if it may have been only on a tiny part of the money you eventually invested so it means nothing.


it is like today a 7% hit in our balance does not sound like much but it basically wipes away the last 10 years of maxing out my 401k at the catch up rate. that is in contrast to someone first starting out who is down a few hundred dollars and couldn't care less.

sme percentage but drastically different effect.

the time frames that effect the bigger balances count the most and that is what my entire explanation is trying to convey. time frames and averages don't mean a thing. your personal balance percentage wise of your total assets and those time frames mean everything.
Yes, I agree. Time frames matter. In retrospect, 1991 was a great year to retire if you could afford to do so. The super high returns of the 1990s more than made up for the crappy returns we've had since 2000.
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Old 06-02-2015, 04:22 PM
 
26,591 posts, read 52,334,622 times
Reputation: 20438
Interesting to see the varied ways we travel to reach retirement... for some it just happens as in zero planning with no thought...

Others have a well thought out plan, often implemented at a young age and are able to enjoy the fruit of their labors...

Of course, there is always the Health Wild Card... be it your own health or that of a spouse/dependant.

I never counted on having a pension and this has proved a self-fulfilling prophecy... was never intended that way... just the results of mergers, downsizing and outsourcing.

My W2 income has never been great... especially for the high cost of living area I call home... the SF Bay Area.

What I did do was implement my own plan at age 22... which consisted of living well below my means and parlaying the money I earned into Real Estate... both residential, commercial and institutional income property...

So, in the broad sense... I will never retire as long as I continue to actively manage my Real Estate Portfolio... on the other hand... losing my W2 income would not change my lifestyle in the slightest... only Uncle Sam would take a hit...

Looking back... everyone has missed opportunities... for me... there were a few on the Real Estate side of things... none that were deals of a lifetime... just some where I had put in a lot of effort with nothing to show because someone else walked away with the deal... mostly probate sales.

On the stock side of things... well... there was that $1000 of Apple Computer I bought in 1981 and later sold with a $800 profit... the only time in my life I bought an individual stock and made money... giving me a 1 out of 4 average ;-(

I come from Farm Stock where owning the land is everything and the Financial Markets are still seen as a place populated with hucksters in suits... no exaggeration... just the way it was with Grandparents on both sides having lived through the Depression at a time when their friends lost everything... including the family farms...

Really appreciate the insights from many CD posters and their willingness to share... learn a lot here, if nothing more than the insight to view from other perspectives and it is very much appreciated.
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Old 06-02-2015, 04:52 PM
 
71,706 posts, read 71,829,507 times
Reputation: 49273
Quote:
Originally Posted by mysticaltyger View Post
Yes, I agree. Time frames matter. In retrospect, 1991 was a great year to retire if you could afford to do so. The super high returns of the 1990s more than made up for the crappy returns we've had since 2000.
the absolute worst times to retire were 1907 , 1929 , 1937 and 1966. the 30 year periods that followed would have had you running out of money before you ran out of time following the 4% safe withdrawal rate.

the y2k retiree may end up in that group too .

it is interesting to note that all 4 time frames actually had pretty good returns over 30 years. but very poor first 15 year periods killed the entire retirement in all cases.

so by analyzing the data we learned that if real return averages of all the failures fell below 2% the first 15 years and no matter how much better things got at no point could the retirement recover without big spending cuts.
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