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URL:  http://boards.fool.com/dbquotif-you-mean-by-income-expected-return-on-25559689.aspx

Subject:  Re: Income Planning Assumption Date:  6/5/2007  4:01 PM
Author:  telegraph Number:  57787 of 75859

dB:"If you mean by income expected return on investment, vanguard.com has charts that show expected return and several other guidelines based on fairly long term historical data for portfolios ranging from all equities to all bonds in 10% increments. IIRC, a 60% equity/40% fixed-income portfolio has historically returned about 8.5%. I think a 60/40 split is usually characterized as moderate risk, and is commonly used by large institutional investors."

Yes, but unfortunately, when you retire, you are no longer ion the 'historical return' category. You are in a very specific window of 30 years starting that year, which could be as bad as 1968 to retire, as bad as 1929 (first part) to retire, etc.

And even there, everything is based 'upon the future being no worse than any 30 year period in history'. it could be worse.


"While there are folks who argue that the past is no guarantee of the future, over a long enough period of time and with broad market indices, you can expect historical data to reflect the kind of perturbations likely to be encountered in the future. So I use the charts Vanguard shows as a guideline."

The problem is your withdrawal period starts the day you retire. And you don't have 40 or 50 year horizons, or get to say , gee, if I retired three years later I'd be in good shape. You are retired.

Depending upon your level of risk, and other income sources, you aren't going to get 6 or 7 or 8% withdrawal rates likely going forward. You haven't in the past for any 30 year period - 4% was 'safe'.

Of course, if you make it through the first five to ten years, with no downturns, you are in very good shape. but no one can predict that.

The stock market goes up 2 out of every 3 years on average..but it also could go down five years in a row. The average person is XXX lbs and is X feet Y inches tall. Great. But that doesn't help get you clothes that fit you necessarily.

t.



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