The Millionaire Delusion + new 401K chart accounting for 4% annual inflation
It's so true that a million dollars is not a big deal anymore. But I am still shocked at what a million dollars can buy today in the Bay area relative to outside the Bay area. Moving on...
So maybe my 3% inflation was in fact too padded. If you believe this article, inflation has actually been averaging 4% during this past half century. During the past 20 years, the writer says we were in a "tame 3%." So this reinforces my first chart from my previous post. But if we want to be more cautious, a new chart with 4% (all previous assumptions unchanged) should be taken into consideration. So if 4% annual inflation is true, we'll be broke by my age 78. Dammit!
posted by baconandeggs at 12:15 PM
2 Comments:
don't freak yourself out just yet. i agree that inflation should be estimated at 4% to be conservative. but you should definitely factor in Vik's retirement savings as well. To be conservative, say she's going to contribute the same amount as you but starting at a later date. that should cover 78 and on. also remember, never rely only on 401K, you should have diverse investments in other things. Stocks, real estate, etc. although those are riskier, they have a higher payoff. even just sticking additional money in an index fund would help you save money above the inflation rate. Also, if your expenses include sending a kid to an expensive university - remember investments in education are priceless...
Yah, i think your suggestion to factor in viks' retirement contribution at the same rate as mine (but at a later date) is a good one.
And yes, I agree our non-retirement portfolio will also play a role. I didn't factor that in at the moment cause I feel it's too far out and fuzzy. I have this bad feeling that if we move back to the bay area, a big chunk of our non-retirement portfolio will be absorbed into the new house. I intend to revisit and re-assess periodically of course.
After digesting this exercise for a few days, i am a bit more at ease and now think our retirement will be OK as long as we stick to the plan. The reason I was uncomfortable before was partly due to the numbers but I'd say more of the fact that we didn't have a goal and a plan. The plan is still a bit away from where I'd like it to be since I now need to take a closer look at our non-retirement portfolio strategy.
Post a Comment
<< Home