Milestones in portfolio growth?

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Snowjob
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Milestones in portfolio growth?

Post by Snowjob »

When you start saving for retirement the final goal of XXXXXXX dollars seems unreachable its so far away. Did anyone / does anyone have a set of milestones that they reached or shot for?

Portfolio Dividend Milestones - *co-worker who introduced me to the site 3 years ago shoots for this*
- $1000 in dividends a year
- $1000 in dividends a month
- $1000 in dividends a week
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AzRunner
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Post by AzRunner »

My own approach was just to save as much as we could while not depriving ourselves of vacations and meals out. The key is living below your means. Once you get the savings habit started, wealth accumulation will happen.

Norm
TheEternalVortex
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Post by TheEternalVortex »

Perhaps:
$5,000
$10,000
$25,000
$50,000
$100,000
$250,000
$500,000
$1,000,000
$2,500,000
$5,000,000
$10,000,000
...

I've hit some but not all of these ;)
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market timer
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Post by market timer »

Pay off high interest CC debt: May 2009
Pay off all CC debt: July 2010
$10K/year inflation adjusted interest income from TIPS: 2013?
$30K/year inflation adjusted interest income from TIPS: 2017?

Might come up with more fulfilling goals along the way.
ResNullius
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Post by ResNullius »

For a number of years, I looked towards a milestone that would be sufficient to suffer a 50% drop in value, stay flat for a couple of decades, yet still be enough to maintain our standard of living for the rest of our lives. I can't say we've reached it yet, but I can't say that we haven't either. The ultimate inquiry is how much do we need to live the way we want to until we're dead. I can only guesstimate, because you never really know how little you can get by on until you have to get by on it.
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tetractys
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Post by tetractys »

My goals have been modest, to contribute a certain amount each year, and to reach a point where portfolio growth overshadows those contributions. I haven't thought much about dividend income goals, because as an accumulator those are little more than something to reinvest. -- Tet
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Tyrobi
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Post by Tyrobi »

Objective: To retire in year 2040 at the age of 60.

Age 30: $100,000 / 2x annual expenses
Age 35: $300,000 / 6x annual expenses
Age 40: $500,000 / 10x annual expenses
Age 45: $750,000 / 15x annual expenses
Age 50: $1,100,000 / 22x annual expenses
Age 55: $1,500,000 / 30x annual expenses
Age 60: $1,800,000 / 36x annual expenses
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waitforit
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Post by waitforit »

I'll say this..

When I started out 5 years ago I put down some projections 'just for fun' on paper as to where I thought I'd be in 5 years. I am happy to report I have more than doubled my number that I thought I'd be happy with - and during that span we lived through the 'great recession'.

It was a powerful lesson in saving during the accumulation phase. My investment returns are probably nil over the past 5 years yet I was able to put away a substantial sum of money ala 'beardstown ladies' :)

I setup my net worth milestones as such (nominal):
-zero (ie, debt not greater than assets)
100k
200k
300k
500k
1 mil
2 mil
5 mil
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bob90245
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Re: Milestones in portfolio growth?

Post by bob90245 »

Snowjob wrote:When you start saving for retirement the final goal of XXXXXXX dollars seems unreachable its so far away.
Just sock away as much as you can. When starting out, your saving rate is the overriding factor.

That's my Advice for Young Savers.
Ignore the market noise. Keep to your rebalancing schedule whether that is semi-annual, annual or trigger bands.
gutrageous
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Post by gutrageous »

>>Objective: To retire in year 2040 at the age of 60.

Age 30: $100,000 / 2x annual expenses
Age 35: $300,000 / 6x annual expenses
Age 40: $500,000 / 10x annual expenses
Age 45: $750,000 / 15x annual expenses
Age 50: $1,100,000 / 22x annual expenses
Age 55: $1,500,000 / 30x annual expenses
Age 60: $1,800,000 / 36x annual expenses<<

Are you assuming your expenses will remain flat at 50K for another 30 years? My guess is that in 30 years, $50K "might" get you an iwhatever.
Jacotus
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Post by Jacotus »

TheEternalVortex wrote:Perhaps:
$5,000
$10,000
$25,000
$50,000
$100,000
$250,000
$500,000
$1,000,000
$2,500,000
$5,000,000
$10,000,000
...

I've hit some but not all of these ;)
Those look like the levels of a "Who Wants To Be a Billionaire" gameshow. :)
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Tyrobi
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Post by Tyrobi »

marshallv wrote:>>Objective: To retire in year 2040 at the age of 60.

Age 30: $100,000 / 2x annual expenses
Age 35: $300,000 / 6x annual expenses
Age 40: $500,000 / 10x annual expenses
Age 45: $750,000 / 15x annual expenses
Age 50: $1,100,000 / 22x annual expenses
Age 55: $1,500,000 / 30x annual expenses
Age 60: $1,800,000 / 36x annual expenses<<

Are you assuming your expenses will remain flat at 50K for another 30 years? My guess is that in 30 years, $50K "might" get you an iwhatever.
It's just a really rough plan to make it easy for me and my wife to keep track.

Here is how I come up with that plan that I posted in other thread.

I mainly concern about the final value. Using 4% withdrawal rate, the amount needed at retirement is $1,800,000. This objective can be achieved by starting with a sum of $60,000 in 2010 and adding $20,000 per year for 30 years until 2040 while getting a return of 6%. This financial goal will allow us to withdraw $72,000 per year beginning at age 61 for at least 30 years with a high probability of preserving the principal.
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Babakhani
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Post by Babakhani »

I haven't even decided on my critical mass yet mostly because I can't decide how well i would like to live in retirement. But I am thinking $5M should be a good number to give us $200K on 4% withdrawal rate. Anything over would be gravy. I guess my goals are:

1) no debt
2) no mortgage
3) no school loans
4) increments of $500k
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asset_chaos
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Post by asset_chaos »

I don't have specific dollar milestones I shoot for, but I do record total portfolio distributions as a percentage of my gross salary. Of course, there are several caveats on this measure: 1) when I was yonger, my portfolio was 90/10 stocks/bonds and set for capital growth; 2) asset allocation has a tremendous influence on this ratio of distributions to salary; 3) if you're successful, salary growth can easily exceed distribution growth, so one shouldn't get upset if this ratio goes down for several years. But, as retirement appears on the horizon, if this ratio heads towards 100%, then we're probably not doing too bad.
Regards, | | Guy
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Post by traineeinvestor »

I use two sets of milestones.

The first is "the number" needed to retire. This is a moving target and gets reviewed from time to time.

The second tier is short term milestones which get reset every year (similar to savings rates). These may include (i) first million (ii) first property (iii) pay off mortgage on home etc.

This year's milestones were (a) complete the property portfolio - the net rent will, once the mortgages are paid off, meet our base line retirement income and (b) the next round number for our net worth.
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Post by Ron »

My wife/me have never had any numerical milestones in our lives (age 60+, married 40+ years).

All we had was this simple question:

Can we live life (financially), in the way we wish, without having to worry about others (i.e. jobs, family, etc.) to support our desired lifestyle and also care for our disabled son after we pass?

In other words, did our income (both pre/post retirement) meet our anticipated current/future expenses?

The anticipated answer is “yes”; to us, that's all that matters.

- Ron
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lmpmd
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Post by lmpmd »

Interesting article on what people think you need for retirement:
http://finance.yahoo.com/focus-retireme ... dingwealth
neverknow
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Post by neverknow »

..
Last edited by neverknow on Mon Jan 17, 2011 10:55 am, edited 1 time in total.
Gekko
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Post by Gekko »

no but as part of my master spreadsheet i have a projection tab -

Image

i changed the start amount and the annual contribution and removed ages for this example to show you but you get the idea. my "allocation return" pulls a weighted average of my current allocation weighted by historical returns. it's all automated with excel formulas so at the press of a button i can project out my future net worth based on years forward. and all of the data is pulled from the other tabs in the spreadsheet which has that data (prices and yields) pulled from the internet. all refreshed at the touch of a button. sick, i know.
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goalllll!

Post by mcblum »

I remember when I made my 1st purchase; 1991. I sold my college ring in order to get my minimum. Made the mistake of accessing my portfolio every evening (by phone) to check levels. It went up and down a dollar a day. I had, for mental health reasons, to stop that... Around 2000, I passed 50K; a number I never in my life dreamed of reaching, only to see the bottom drop out and losing 40%. I was better deversified in the mid 2000's so did not get hit as bad as some. Maxed out Roth, 401K and now 403b. Now building taxable. I have a goal of 2k/month (about 600k) and believe I can make it in seven years. I'll be 74 with 50 years on the job. Then, I'll re-access.
The best to all. Your combined wisdom gave me hope for the future
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Post by noseebob »

I lived life to the fullest through my 35th year when I realized that I needed to set some goals. At that point of my life, I had been travelling the globe and only worked when the bank account was extremely low. In 2005 with a 60k net worth, I set a saving goal of 100k per year. The first couple years I barely cracked 100k but the last few years I easily exceeded the 100k bar.

As for milestones, I didn't have any other than my 100k per year. Simple goal but it worked for me. I retired at 41 and managed to still save 100k during my first year of retirement.
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Post by Gekko »

noseebob wrote:I lived life to the fullest through my 35th year when I realized that I needed to set some goals. At that point of my life, I had been travelling the globe and only worked when the bank account was extremely low. In 2005 with a 60k net worth, I set a saving goal of 100k per year. The first couple years I barely cracked 100k but the last few years I easily exceeded the 100k bar.

As for milestones, I didn't have any other than my 100k per year. Simple goal but it worked for me. I retired at 41 and managed to still save 100k during my first year of retirement.
retired and still saved $100K a year? what are you doing? printing money in your basement?

http://www.cnbc.com/id/35988260/
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Snowjob
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Re: Milestones in portfolio growth?

Post by Snowjob »

neverknow wrote:
Snowjob wrote:Did anyone / does anyone have a set of milestones that they reached or shot for?
I'm reaching back into what I was thinking 25 years ago ... my goal was to make that employer unnecessary. So the way I looked at it, was in number of hours I would need to earn flipping burgers at minimum wage.
Thats an interesting perspective. I sort of had an American Beauty image in my head for a moment of Kevin Spacey flipping burgers.
--
Its great to see the different ways people mentally account for or approach the savings / retirement goals. Thanks everyone for sharing!
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jh
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...

Post by jh »

...
Last edited by jh on Sat May 29, 2010 2:14 pm, edited 1 time in total.
Ron
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Post by Ron »

Gekko wrote:no but as part of my master spreadsheet i have a projection tab -
Just wondering where your "deduction" tab is. As I understand it, you are computing a terminal growth value, through whatever means/constraints you wish (I have no problem with that at all - it's a personal decision).

However, I would assume that somewhere you will be reducing the value of the terminal portfolio by what you need to draw for sometime in your life (otherwise, why save/invest at all?).

- Ron
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Re: Milestones in portfolio growth?

Post by Ron »

jh wrote:I have a mental picture that I am pushing a rock up a hill, and getting it to the top will be when I achieve critical mass. It will be all down hill from then on.
I don't neccarily share your view of "downhill".

Even if you reach your level of income that exceeds your current expenses, there are those times that your requirement for additional income will be needed (e.g. the "sh*it happens scenario).

If you have met the equilibrium of income = outgo, you are fortunate. However, you cannot truly plan for "outgo" requirements in the future. A good guess? Of course - but nothing more.

Just words from one who has been/is there...

- Ron
Last edited by Ron on Sun Apr 04, 2010 11:18 am, edited 1 time in total.
Gekko
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Post by Gekko »

Ron - the projection tab is always from "today" forward and assumes "X" Start Amount, "Y" Annual Contribution, and "Z" Annual Return. X, Y, and Z could always change "tomorrow". and when they do, they will change on the spreadsheet. but it's always a "today looking forward" exercise that's far from perfect and with many assumptions on what i'm able to continue saving, investing, allocating etc. i doubt that i can continue saving X every year - especially through retirement.

but i do see your point regarding consumption.
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Re: Milestones in portfolio growth?

Post by Gekko »

jh wrote:
Snowjob wrote:When you start saving for retirement the final goal of XXXXXXX dollars seems unreachable its so far away. Did anyone / does anyone have a set of milestones that they reached or shot for?

Portfolio Dividend Milestones - *co-worker who introduced me to the site 3 years ago shoots for this*
- $1000 in dividends a year
- $1000 in dividends a month
- $1000 in dividends a week
I get pretty happy every time I add another $25k to my investments.

One of the most important milestones I am after is to achieve "critical mass". This will be when my investment return is equal to or greater than the amount of money I am adding myself.

I have a mental picture that I am pushing a rock up a hill, and getting it to the top will be when I achieve critical mass. It will be all down hill from then on.
i've said it before - my critical mass would be $5M in invested assets. that would generate roughly $200K annual tax free income in a VG Tax exempt LT muni bond fund earning a 4% tax free yield. i would be fine on $200K tax free per year - plus my old company pension and SS as gravy if it's still around - even given the wildcards of inflation and medical insurance/costs. that's like making $400K gross. critical mass is making more in yield than physically working. i just want enough to live on and be happy.
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Post by jh »

...
Last edited by jh on Sat May 29, 2010 2:14 pm, edited 1 time in total.
Ron
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Post by Ron »

jh wrote:Investment returns will probably grow much faster than salary increases. So, attaining "critical mass" is vital and necessary for retirement to be possible.
I will agree to your "revised vision :lol: ".

Yes, I oft times made much more in my retirement portfolio than my income (when I was still working), and had this view of "I can consider retirement when I have "x" dollars".

However, life can turn out to be much different than any planning. That's all I wanted to add.

Can you plan for the "aw s*it" situation? Of course not. But you must be aware of the possibility and maybe add a little to "your number", just in case.

- Ron
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Post by stratton »

1. Your retirement account has more money than your salary.
2. When it's at 2x your salary.
3. When it makes more in a year than you do.
...

Paul
Tuxx
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Post by Tuxx »

I just shoot for passive income goals. After losing over 50% in my portfolio 2 times this decade (so far) is discouraging.

Can someone help me find a replacement for my 5.95% CDs that start rolling over next month? :shock:
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Post by Gekko »

Ron wrote:
jh wrote:Investment returns will probably grow much faster than salary increases. So, attaining "critical mass" is vital and necessary for retirement to be possible.
I will agree to your "revised vision :lol: ".

Yes, I oft times made much more in my retirement portfolio than my income (when I was still working), and had this view of "I can consider retirement when I have "x" dollars".

However, life can turn out to be much different than any planning. That's all I wanted to add.

Can you plan for the "aw s*it" situation? Of course not. But you must be aware of the possibility and maybe add a little to "your number", just in case.

- Ron
i'm hoping that if things get really bad i can come live with my Grandpa Ron. i don't eat a lot, i'm clean, and i won't take up a lot of space. maybe you'll even let me take the convertible out every once in a while for dates at the drive in.
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Post by zotty »

Savings goals are good. Portfolio value goals are bad. why? You can control your savings goals (to some degree), but you have absolutely no control over portfolio NAV in a given day or year. Mr Market will dish what it wants.

I learned this lesson the hard way. My 40th happened to come in 2008 and i was aggressively working toward a portfolio NAV goal. Unfortunately, each new dollar got immediately chewed up. I saved a lot of money, and still lost a lot of money. It was very frustrating.

One year late, I achieved the goal with the help of Mr Market, who might take it away tomorrow. Had I just focused on my savings goals exclusively, i'd have saved myself a lot of heartburn.
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Post by KyleAAA »

The jump from $1,000 in dividends per month to $1,000 in dividends per week is pretty large. But I guess it's a good goal to have.

Personally, my goal is $1,000 in dividends per day :)
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Post by marshall »

I tend to view milestones in terms of what my SWR will provide in monthly income. It reminds me of the Verizon commercial where they show all of the people as the "Network". I view my "Network" as the the SWR income my portfolio will provide. This is income that can be generated without a job.
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Post by Ron »

Gekko wrote:i'm hoping that if things get really bad i can come live with my Grandpa Ron. i don't eat a lot, i'm clean, and i won't take up a lot of space. maybe you'll even let me take the convertible out every once in a while for dates at the drive in.
Now that's funny :lol:

Never been a "grandpa" (never will).

Anyway, I believe "drive in" (assuming you're speaking of a movie - not Sonic) are long gone in my area of the woods; you would have to bring your own...

- Ron
integrity
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Post by integrity »

do most people here track portfolio balance or investment return? i find it way too complicated to track actual return (need to determine average basis, need to follow transactions being made in several different locations not all compatible with yodlee/mint).
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re: return.

Post by mcblum »

I tried to track return. Got 3 different figures for 3 different calcs. Now, i just use portfolio value/last years portfolio value. Mostly nice...
Marty
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Re: Milestones in portfolio growth?

Post by mcblum »

jh wrote:
Snowjob wrote:When you start saving for retirement the final goal of XXXXXXX dollars seems unreachable its so far away. Did anyone / does anyone have a set of milestones that they reached or shot for?

Portfolio Dividend Milestones - *co-worker who introduced me to the site 3 years ago shoots for this*
- $1000 in dividends a year
- $1000 in dividends a month
- $1000 in dividends a week
I get pretty happy every time I add another $25k to my investments.

One of the most important milestones I am after is to achieve "critical mass". This will be when my investment return is equal to or greater than the amount of money I am adding myself.

I have a mental picture that I am pushing a rock up a hill, and getting it to the top will be when I achieve critical mass. It will be all down hill from then on.
I like that term "critical mass" With limits to Ira,401k and I will make it this year!
Marty
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Post by scrabbler1 »

Here are my milestones, or achievements:

1997 - hitting the $100k mark for my non-retirement investments.

1998 - paying off my mortgage and becoming debt-free.

2000 - hitting the $200k mark for my non-retirement investments.

2004 - hitting the $300k mark for my non-retirement investments.

2008 (July) - when my company's ESOP hit $300k, enabling me to cash it it out and retire that November. That level was my goal to be able to live off dividends which would come mostly from the proceeds of that stock sale back to the company.

My next milestone is to have my total portfolio (retirement and non-retirement) hit the $1M mark. I was very close in 2008 before the market tanked. Needing $70k to pay the taxes on the ESOP sale made another dent. Only a few days ago did I reach a new all-time high, exceeding my grand total in 2008.
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Post by Random Musings »

My milestone - when I don't have to work.

RM
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Post by Sidney »

integrity wrote:do most people here track portfolio balance or investment return? i find it way too complicated to track actual return (need to determine average basis, need to follow transactions being made in several different locations not all compatible with yodlee/mint).
I monitor three things: balance, allocation (in case I need to re-balance) and unrealized losses in taxable accounts (in case I want to tax loss harvest).
I always wanted to be a procrastinator.
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Post by Rodc »

I have a sense of how much I want, balanced with a sense of how much I want to save (and also spend now), balanced with expectations about social security and pensions. None of this is cast in stone, but it is a scenario that if it plays out my retirement will be similar to my current situation as far as discretionary spending. Basically it presents more or less consumption smoothing model.

I simply graph this scenario out to my presumed retirement date.

Then I plot reality and watch how they compare.

For a while I was bit above the nominal line. With the recent crash I fell rather below my nominal line. I am now closing in once again to the nominal target. If 2010 turns out to be pretty good I'll be back to my target, if not or we get a significant correction, it might be a while. If we get another lousy decade I'll remain behind and either I can simply retire with less, spend less now to save more, or work a little longer.

I like it because you can over time see the effect of compound growth (interrupted from time to time of course), and it is a nice graphical representation of progress that you can check any time as opposed to just a few arbitrary key points.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Post by RaleighStClaire »

I started investing in July of 2007 and have been in the red ever since. Until 4/1, that is, when my portfolio achieved a positive IRR, my first investing milestone. Now I want to think of my next milestone -- maybe when my portfolio is 10x as big as my yearly savings? Sounds good to me.
Where's that red one gonna go?
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Post by letsgobobby »

every quarter I take my current portfolio, project a 3% real growth to the age of retirement, then calculate the annual income that produces with a 4% SWR.

My goal is for that number to = my current expenses. I've hit some milestones along the way, mostly even numbers ($10k, $20k, etc) and hope it continues.

It's been interesting in the quarters where I'm going backwards (combination of market losses, higher age, etc).

But for the most part this is the only number that matters to me, and it seems to help me stay on track, quarter to quarter.
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Post by Padlin »

In 93 I figured out what I thought my number should be and came up with a spreadsheet projecting salary, contributions, acct balances and so forth up till I would have my number. 17 years later it's worked out to be surprisingly accurate although my number has changed by roughly 25%. I kept the original, and made up a newer version that tracks where I am and where I need to be to retire. The yearly projected balance to achieve my number is my milestone.
It's interesting to compare my yearly projections made back in 93 to where I actually am each year.
Regards | Bob
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Post by Sailorette »

We have an annual goal that's two-fold: 1) annual contributions towards savings and investments, and 2) goal net worth increase. The net worth goal typically relies on some manner of an increase in the value of our investments, so we just focus more on making sure we make our goal contributions. The net worth tracker just encourages our efforts!

Our long-term goal is to have $1,100,000 is retirment savings by the time I'm 40. That's the number that we estimate we need in order to be able to quit our corporate jobs and switch to something that just pays our annual expenses and doesn't require any further contributions in order to retire full-out at 55. If it gets pushed back a year or two, no big deal- it's just motivating to have that target in place, especially when I'm having a rough day in the office :wink:
20 years from now you will be more disappointed by the things that you didn't do than by the ones you did... throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails.
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Re: Milestones in portfolio growth?

Post by Wagnerjb »

Snowjob wrote:When you start saving for retirement the final goal of XXXXXXX dollars seems unreachable its so far away. Did anyone / does anyone have a set of milestones that they reached or shot for?
It is important to set long-term savings goals, and it is important to monitor progress via milestones. Personally, I prefer using a multiple of salary (for example 25x at retirement), since your salary - and standard of living - may rise substantially over time.

Don't overdue the focus on intermediate milestones, since you will slip back many times. Maybe for younger folks it is reaching $100,000 and $200,000 or for older folks reaching $1,000,000 and $2,000,000. But during your lifetime you may reach $500,000 at a stock market high, only to see that dip back to $385,000 when the market drops. It may take three years to get back to $500,000....but it will happen. Don't celebrate too much when you hit $500,000 but don't fret when you retreat either.

Keep your focus on saving an appropriate amount, and rebalance as necessary.

Best wishes.
Andy
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Robert T
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Post by Robert T »

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This is similar to what I track (at the end of the day this benchmark is really all that matters for retirement savings/investments).

Image

The blue line is simply compounded (expected/needed) savings and (expected/needed) investment returns to retirement target. Retirement target is based on expected needs during retirement (and expected inflation and tax rates). Statistically there’s an even chance of success or failure (even chance (50%) of ending above or below the line). The dashed line shows Bodie’s formula for the impact of a one standard deviation divergence in expected return on portfolio value. i.e. about a 1 in 6 chance (16% odds) of ending up with less than the lower bound line or more than the upper bound line).

Interestingly, earlier Monte Carlo simulations (through Fidelity and Financial Engines) give similar results to Bodie’s formula i.e. to increased the odds of success from 50% to 75% I would need to increase annual savings 1.9 times (nearly double) from the Monte Carlo simulations, and from Bodie’s formula, to increase the odds of success from 50% to 84% I would need to increase annual savings by 2.1 times (just over double).

The assumption is of course that history provides the universe of returns/standard deviations from which future returns are drawn => this may turn out to not be valid. FWIW, the approach I took was:

To start
  • - Have realistic expectations of future returns (and their variability) [my expected future returns are below the historical mean while maintaining the historical deviation]
    - Build in flexibility [allowing for potentially retiring later, living on less etc]
    - Try to add more to annual savings (target) over time
If substantially below target along the way then options include:
  • - Save more
    - Retire later
    - Live on less during retirement
    [again, build in flexibility at the start]
And IMO the art is to balance the trade-offs between current and future consumption. I skimp on some things but not others (e.g. family vacations), and am happy to forego some future consumption for those ‘priceless memories’.

Obviously no guarantees.

Robert
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Last edited by Robert T on Tue Apr 06, 2010 8:25 am, edited 1 time in total.
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