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Originally Posted by GregWeld
I have zero idea for an answer for that question..... What I try to do is EARN 5% on my investments --- some pay more some pay less..... But my net worth/income far exceed "normal" --- and we have zero in fixed expenses.... our actual outflow is HUGE -- but it's just because of the way we live -- versus what we HAVE to pay to live. My only point being --- that I haven't had to experience that type draw down -- nor have I had to have that conversation with any of my financial people.
I think that people are living far longer than they used to ---- so many basic assumptions about finances are being tossed out the window. I don't think it's unusual for people to live 30 years in retirement..... Maybe not both but one or the other of a couple anyway.
Here's what I usually say to people..... to get them to think "correctly". If you're coming up to retirement - and you're struggling to live on $200,000 a year..... how much money do you think you're going to need to live retired!!!! I figure I make about $50,000 annually PER MILLION DOLLARS invested.... so that person is going to need $3+ million and be collecting maximum social security etc. Even if you think you'll only need $75,000 in retirement income -- you're going to have to have at least 1 1/2 million..... because the dividends are taxed -- so 20% taxes -- and you're earning 5% -- that's only going to NET $40K a year in spendable income.
However --- it you're drawing down your principal at 4% a year --- and then you have less and less each year to earn you income.... sounds like a real bad plan to me! Let's throw in a decade of crappy market growth -- or stalled out real estate prices.... and you're burning your capital?? Yeah -- just NO! You want to be really old and broke? I sure as hell don't want to be figuring like that.
I've found that expenses GROW.... they don't shrink. My insurance is way up -- our taxes go up -- cars are expensive -- trips are 10 X what I used to spend 20 years ago mostly because they're longer! WTF -- you don't have to get back to work on Monday! Clothing is expensive... and then there's always that pesky health issue and all of that associated out of pocket expense.
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Thanx Greg good info, 3 happens to be my “goal” number. But yeah, inflation is just an unknown variable, best to be prepared as possible