Retire With All Of The Money You Earned

What if you set a goal that by the time you retired you wanted an investment account worth the value of all of your wages added together. How much would you need to set aside and what kind of return would you need. Assume you start contributing to your investment account starting at age 25 and hope to retire at the full retirement age of 67. This analysis will use real wages and real returns (subtracting inflation). With 42 years of work you will need an investment account equal to 42 times the annual wage.

Below is a table showing the real return that would be needed to depending upon what percent of your wages are contributed to your retirement account each year.

Are any the type of real returns shown in the table above achievable over a 42 year time horizon? Over the 45 plus years from 12/31/71 through 2/28/17, the MSCI Healthcare index has achieved an annual real return of 9.87%, MSCI Consumer staples have a real return of 8.37%, the S&P 500 total real return has been 6.43% and the FTSE NAREIT real estate index has a real return of 5.71%.

The goal of retiring with all of the money you ever earned is super aggressive and requires setting aside a large portion of your annual wages and investing in riskier assets. A more reasonable goal that would likely allow you to keep lifestyle in retirement is to retire with around 10 times your pre-retirement income.

 

Disclosure:

The information presented here is the opinion of the author and may quickly become outdated and is subject to change without notice. All material presented in this article are compiled from sources believed to be reliable, however accuracy cannot be guaranteed. No person should make an investment decision in reliance on the information presented here.

The information presented here is distributed for education purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or participate in any particular trading strategy.

Performance data showing past performance results is no guarantee of future returns.

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