Based on some number-crunching by Craig L. Israelsen, Phd, a $500,000 portfolio withstood 5% withdrawals ($25,000 at the start of the period and then increased annually by 3%) for the tested 25-year distributions during retirement.
Seventeen periods were analyzed: 1970-1994 through 1986-2010
Of-course "when you start" in comparison to when major bear markets surface has a big effect on whether you end up with $2 million (1970 start) or $7.8 million (1975 start, just after a major bear market ended). What a range, but you still end up with more than the $500,000 when you started.
The key though is his last sentence, "...diversification is a lifelong investing imperative..."
He says this because keeping 60% in stocks and 40% in bonds makes a tremendous difference over playing it safe with 100% in bonds (millions in almost every case), and investing equally in at least seven asset classes results in even higher ending values. Higher values become important over time because, otherwise, with no growth in the portfolio, those withdrawals become much higher than 5% as your years in retirement continue.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.