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Old Yesterday, 02:43 PM
 
71,643 posts, read 71,777,271 times
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Quote:
Originally Posted by ohio_peasant View Post
How many people had $100K to invest in 1989? Many of us who consider ourselves to be "senior" investors had $0 in 1989, and began slowly in the 1990s, missing most of the bull market. Yeah, we say >20% annual returns consecutively in the late 1990s, but those returns were on a then-paltry capital.

Those who are in a position to save $100K/year today, will reach their $3M in less than 30 years from now... but what will those $3M then be worth? That's a consideration that's often omitted in these calculations.

And most importantly, there's ample evidence that most investors can't leave their money alone. They trade, exchange, gamble... arriving at less cumulative return than the market itself.

The 1980s and 1990s were a halcyon epoch of great returns. Those who were already siding on a tidy sum in the late 1970s, and who had the perspicacity to remain fully invested in the market, were rewarded handsomely. On the other hand, those who started 20 years later, got spooked in the Great Recession and sold at the nadir of 2009, got slaughtered.
it could have been 1k , the gains are the same regardless of the original amount . Make it 100 bucks , it still does not change what that money grew to gain wise.

IN THIS CASE THEY ARE COMPARING LUMP SUM BUYING IN TO A DEFERRED ANNUITY 25 YEARS EARLIER then they want it ... KEY WORD LUMP SUM so we are comparing apples to apples here .

I like immediate annuities and I can see buying a longevity annuity at 62 that cuts in at 80... but I could never see buying a deferred annuity in your accumulation stage unless you were so wealthy you don’t need investments to grow your money.

For most of us 25 years before retirement need to be pedal to the metal to compound those bits we manage to save

Last edited by mathjak107; Yesterday at 03:18 PM..
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Old Yesterday, 02:47 PM
 
71,643 posts, read 71,777,271 times
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Quote:
Originally Posted by ohio_peasant View Post
On the other hand, those who started 20 years later, got spooked in the Great Recession and sold at the nadir of 2009, got slaughtered.
you are just reinforcing what i said ... if they exhibited poor investor behavior then it's on them .. markets recovered and went on to new highs so you can't blame the markets .

Many are just terrible at investing ...some of that group may do better getting 3rd party mgmt to keep them away from behaving badly

Last edited by mathjak107; Yesterday at 02:59 PM..
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Old Yesterday, 03:14 PM
 
1,728 posts, read 615,696 times
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Quote:
Originally Posted by ohio_peasant View Post
How many people had $100K to invest in 1989? Many of us who consider ourselves to be "senior" investors had $0 in 1989, and began slowly in the 1990s, missing most of the bull market. Yeah, we say >20% annual returns consecutively in the late 1990s, but those returns were on a then-paltry capital.

Those who are in a position to save $100K/year today, will reach their $3M in less than 30 years from now... but what will those $3M then be worth? That's a consideration that's often omitted in these calculations.

And most importantly, there's ample evidence that most investors can't leave their money alone. They trade, exchange, gamble... arriving at less cumulative return than the market itself.

The 1980s and 1990s were a halcyon epoch of great returns. Those who were already siding on a tidy sum in the late 1970s, and who had the perspicacity to remain fully invested in the market, were rewarded handsomely. On the other hand, those who started 20 years later, got spooked in the Great Recession and sold at the nadir of 2009, got slaughtered.

An average income in my profession was about $100k per year in 1983, and people in my profession do tend to invest their disposable income. My guess is that an average person in my profession invested about $25-50k per year from 1981 to 1990, and 50-100k per year from 1991 to 2000. These people are retiring now. About 27% of people aged 65 in my profession have a net worth of $1-1.9M, while another 33% have a net worth of $2-5M. Only 14% have more than $5M (which matches the fact that about 10% of people in my profession have incomes that are three times the average for the entire profession). This is net worth per family, where a number of spouses also worked and contributed to investments. In case it is not obvious, I am talking about medical profession. The statistics would not look that way if just investing $100k prior to 1987 regularly yielded $3M thirty years later.


Sorry, I made a typo above, which I corrected: it should be 33% of 65-year old docs have net worth of $2-5M (not 3-5). That is a fairly wide range, but compared with the % in lower and higher bracket, my guess is that 2/3 of retiring docs who have between $2-5M are closer to 2 than to 5.


These statistics suggest to me that, in an excellent 30-year market run which included the invention of PC and Internet, an average investor has made about 7% average annual profit, not 20%+.

Last edited by elnrgby; Yesterday at 03:54 PM..
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Old Yesterday, 03:58 PM
 
Location: Tennessee
23,587 posts, read 17,582,380 times
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Quote:
Originally Posted by ohio_peasant View Post
How many people had $100K to invest in 1989? Many of us who consider ourselves to be "senior" investors had $0 in 1989, and began slowly in the 1990s, missing most of the bull market. Yeah, we say >20% annual returns consecutively in the late 1990s, but those returns were on a then-paltry capital.

Those who are in a position to save $100K/year today, will reach their $3M in less than 30 years from now... but what will those $3M then be worth? That's a consideration that's often omitted in these calculations.

And most importantly, there's ample evidence that most investors can't leave their money alone. They trade, exchange, gamble... arriving at less cumulative return than the market itself.

The 1980s and 1990s were a halcyon epoch of great returns. Those who were already siding on a tidy sum in the late 1970s, and who had the perspicacity to remain fully invested in the market, were rewarded handsomely. On the other hand, those who started 20 years later, got spooked in the Great Recession and sold at the nadir of 2009, got slaughtered.
$100k annual investments is a very large number relative to any “man on the street” typical reference point.
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Old Yesterday, 04:19 PM
 
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Depends on age ..... 100k for a 20 year old is very different then a 62 year old with a 100k to invest
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Old Yesterday, 04:57 PM
 
Location: Haiku
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Quote:
Originally Posted by elnrgby View Post
Right, it is what it is. Very few people in real world achieve market results seen in mathematical models.
If you are implying that market results are far fetched for most people to achieve, that is dead wrong. Mathjak's example was fine and as it stood would indeed yield what he said. But most people do not invest that way - they dribble money in to a 401k over time, or they try to out-guess the market and buy/sell and lose money along the way, or they take a loan on the 401k or any number of things. But that does not mean it is difficult to get market results, it means it is difficult to not let human nature get in the way of a sound investment plan.
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Old Yesterday, 05:16 PM
 
Location: Haiku
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Quote:
Originally Posted by ohio_peasant View Post
What's the rule for a 70-year retirement? Or an infinite one?
Are you serious? I will assume so... It would be hard to calculate a meaningful 70-year rule because there are not enough 70-year sequences to back-test to get good statistics on. I did run a 50-year retirement through my RIP tool and it gives a SWR of 3.6% but I would take that with a big grain of salt.

For an infinite time span, that is equivalent to a withdrawal scheme that does not touch the principal, or at least does not let the average value of the principal decline. The number I have seen for that is about 3%, depending on the exact strategy of investing.
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Old Yesterday, 05:28 PM
 
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Quote:
Originally Posted by Serious Conversation View Post
$100k annual investments is a very large number relative to any “man on the street” typical reference point.

But the point of my previous post is that even in a profession in which people could easily save $100k over 3-4 years in the early 1980s, and could (and did) invest it, and furthermore continued investing comparable amounts for 20-30 years, the result of investing has on average not been a 30-fold increase from the initial $100k investment in 30 years.



The cumulative yield that investors end up with is not equal to the cumulative increase in value of an index, even in an index-tracking fund, even if the investing is done by computers that can examine a billion of models of the past and future in a nanosecond - because a future always remains a future. An investing computer cannot ever exactly predict how each stock inside s&p500 will behave in the next second or next month or next year or next ten years.



Maybe the stocks have become so overvalued at least partly because both writers of computer algorithms, and the AI components of the computers that do automatic investing, have learned how to better predict what particular stock will do in the next second, thus progressively increasing the value of a particular fund or portfolio (without much real relationship with the quality or lack of quality of Boeing planes, or any other marketable product?)?


The old book "The Intelligent Investor" by B.Graham fell into my hands just around the time when my Fidelity mutual fund was losing money at the top of the Internet and stock market boom of the 1990s. In the beginning of the book, Graham says something to the effect that a rare success in the stock market, over a long term, consists of not losing money (ie, just breaking even with inflation). Maybe this no longer holds in modern times, but it seemed bleak enough to me to decide not to play with the risk. I figured, if I need 10 times more money 50 years from now, then I'll just work a lot for a while, and spend modestly. Besides, as the person from Ohio pointed out in some of his/her posts, like most young people I ever met, I WANTED to work when I was young, even if had not been paid. Young people are not supposed to be disillusioned before they even have much of any experience that could disillusion them, for goodness sake :-).
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Old Yesterday, 05:34 PM
 
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The results are the results because these are the actual funds ..try to dispute the returns all you like but you are wasting your time ...these are the actual results ......

The bottom line is annuities are products you should buy after you have attained the level of wealth you need ... one should not buy an annuity instead of growth vehicles decades prior ,if they are not at the level they need or want to be at ...

Whether you add an immediate annuity or deferred annuity at retirement and use some of your bond budget is a decision that should be made after attaining that level.

You can stop the fear mongering and trying to find fault with investing in equities for the long term .. if you are gun shy or don’t need them that is fine .... but Advocating buying an annuity 25 years before you need one and have amassed the growth you need would be very poor advice...
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Old Yesterday, 05:48 PM
 
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Quote:
Originally Posted by TwoByFour View Post
If you are implying that market results are far fetched for most people to achieve, that is dead wrong. Mathjak's example was fine and as it stood would indeed yield what he said. But most people do not invest that way - they dribble money in to a 401k over time, or they try to out-guess the market and buy/sell and lose money along the way, or they take a loan on the 401k or any number of things. But that does not mean it is difficult to get market results, it means it is difficult to not let human nature get in the way of a sound investment plan.

No, in fact most people I know are self-employed, do not have 401k, and invest their savings in index funds. Except during bonanza times such as recently, all I seem to ever hear is lamenting that they are losing money even though the index is supposed to be predominantly up. The only two people I know that have made a lot in the stock market actually trade individual stocks by themselves, and are constantly trying to outguess the market (I certainly wouldn't do that because I wouldn't have I clue what I am doing :-). Again, I know nobody, absolutely nobody whose money increased 30-fold in 30 years in an index-tracking fund. When we compare their method of how-long-can-I-withdraw-without-portfolio-failing with my annuities, we often tend to arrive to about the same numbers (ie, what they can safely withdraw and what I will get from the annuities is about the same, with their investment in the portfolio being about the same as the sum of my annuity premiums. Don't forget that annuity withdrawals do not diminish the value of the annuity - the withdrawals are fixed for as long as you live. You may leave a massive portfolio to your beneficiaries - that is obviously a definite advantage of a stock portfolio, but if you need retirement income for yourself only, you don't need to maintain $1M for every $40k that you need per year - you just need to pay around $220k premium when you are 45 in order to get a $40k annuity payout every year starting at 70, and feel free to live however long you want).
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