I'd be interested in hearing the thoughts of this board on investing during retirement. What would you recommend for the following situation?
Retired couple, age 65, with the mortgage paid off and having $500,000 to invest, all in a taxable account. Social security income of $10K, currently spending $40/yr for living expenses, including taxes. Expected inflation of 3%/yr. How would you recommend they invest the $500,000?
What I was aiming for here was someone needing to earn inflation plus 5% and not being able to tolerate much volatility. By my arithmetic, if the above couple averaged inflation plus 5%/yr, they would run out of money in 37 yrs, even without a bad investment year or unexpected expenses, so the assets I specified are a bit low. The real question I wanted was, can someone count on inflation plus 5%? If not, what can they count on earning, and how must they invest?
I do not get the link through yahoo....sorry...go to the search machine....and look for "early retirement spreadsheet".....take the first result....and look at the right part down on that site! Stephan
Inflation plus 5% is a very lofty goal in this type of retirement situation IMHO. Especially if you consider that during bad years you are going to be selling a larger percent of your holdings to meet expneces forcing you to sell low. With volitility you probably need to average signficantly higher than 5%+inflation to actually get 5% plus inflation.
Roberts, wright and humming-hallo! There are a lot of things written about "safe" withdrawel-rates in Retirement.Motl. F. has an own section on this......but I find the following page-that basicly works upon the idea of "early" retirement quite conclusive: "retireearlyhomepage" History has obviously shown,that a 3% withdrawel-yearly adjusted for the respect.inflationrate is a "safe" rate in order to never run out of money.....if invested in at least 50% S+P 500 etc.....but look for yourself! You even might find,that the idea is for you....};>) Stephan