Minimum Return

[barbarian]

Just curious on everyone's opinions

What guaranteed return would it take for you to get out of stocks, etc and lock in a guaranteed annual return for say the next 20 years?

[boneil]

10%

But I would question "guaranteed"

[davidsa]

around 7 to 8% for a retiree. The logic behind this is assume you have 50% of your portfolio in fixed income products making 4%. The other 50% is in equities making around 10 to 11 historically. The average of the portfolio is between 7 and 8%.. So if someone said they could provide me a low/no risk guaranteed annual return for 20 years of 7% of better that would meet my target at lower risk.

If I was say 30, my target equity investment is closer to 90% so that supports the 10% mark suggested by boneil

[sdbrison]

The big unknown is inflation. At the current rate of 3% then an 8% return would suffice for me. If inflation is 9% like it was a few years ago then you are losing money at 8% return.

[davidsa]

The big unknown is inflation. At the current rate of 3% then an 8% return would suffice for me. If inflation is 9% like it was a few years ago then you are losing money at 8% return.

very accurate!

but the 4% rule and age based allocations of the portfolio is inherently based on the fed hitting its target range for inflation. clearly events can occur in 2021 and back in the early 1980's that make them miss.

[piscesman]

Everyone's needs are different. Some people can live on $55,000/year or less whereas others need $85,00/year. or more. How big your IRA is. A Roth as another for tax exempt withdraws. Did you work in govt or teaching with an endless pension? Private company and then you could run out if not careful. For us 7% would be the least guaranteed. 4% RMD's, 1% FA & 2% for growth on what's left.

[JohnN]

Everyone's needs are different. Some people can live on $55,000/year or less whereas others need $85,00/year. or more. How big your IRA is. A Roth as another for tax exempt withdraws. Did you work in govt or teaching with an endless pension? Private company and then you could run out if not careful. For us 7% would be the least guaranteed. 4% RMD's, 1% FA & 2% for growth on what's left.

Exactly. Nobody should predict the return they need for the rest of their life until they have enough money to meet their retirement needs. And retirement needs are different for everyone and are less certain the further you are from retirement and/or the younger you are.

I suppose there is some number out there that I’d agree to even though I need to work for 15-20 more years. Call it 10-15%. Who wouldn’t take that in today’s world? The problem is, if the economy changes and returns start averaging 20%, I’m missing out.

Wealth is relative. You have to be in the market (with your money) to stay at market (with your relative wealth). Many people want to get ahead of the rest by taking more risk in hopes of beating the rest with returns. But the real concern should be falling behind if you don’t take enough risk. The amount of risk differs by age, of course, but if you’re in my shoes you’d be a fool to go “risk off” unless you more or less have some real certainty about the expenses you’ll incur for the rest of your life.

[JJohnSind]

As much as 10% is supposed to be a good expectation, I am too addicted to picking those that go more than 100% in a year or less. For that reason alone, I’d never get out.

[davidsa]

Wealth is relative. You have to be in the market (with your money) to stay at market (with your relative wealth). Many people want to get ahead of the rest by taking more risk in hopes of beating the rest with returns. But the real concern should be falling behind if you don’t take enough risk. The amount of risk differs by age, of course, but if you’re in my shoes you’d be a fool to go “risk off” unless you more or less have some real certainty about the expenses you’ll incur for the rest of your life.

Very well said!

Said another way, very few people who are about to or recently retired can sit fully in low risk fixed income products and keep up with inflation for 25+ years. Rather, most require some growth above and beyond inflation to have the money last. I suspect a few think they have enough to retire, but don't so they assume they will stay fully invested in the market because they have no other way to make the money last.

The 4% withdrawal rule and the rule of 110 are in my view good guidelines of retirement readiness and portfolio distribution IF someone is real on income needs. I've found my income needs in retirement are the same as when I worked.

[digthemup]

Here is the question none of us seem to truly ponder about "the next 20 years":

I will say to my self, Self, you have much goods laid up for many years; eat, drink, and be merry.
But God said unto him, You fool, this night your soul shall be required of you: then whose shall all those things be, which you have provided?

[tcesni]

I’d take 8%, if my portfolio was where it was at a few weeks ago. Otherwise I’ve got some catching up to do.

[NitroZ7]

If I could get 5% after tax guaranteed I would take it all day long. I have a municipal bond fund that is paying close to that but it is not guaranteed.

[Mahomee]

13%

[davidsa]

13%

absolutely! beating the S&P500 average for the next 20 years would be sweet!

[piscesman]

13% would give you more options to do more with your life. Living it and not just existing.