I came across an interesting example related to the important first few years of a portfolio’s performance for folks who plan to retire early.

The scenario takes an individual with a $750,000 portfolio. The objective is to take $35,000 every year for 30 years, adjusted for inflation, from this portfolio. The portfolio contains a 75% weighting in a stock index fund and a 25% weighting in a bond index fund.

How much impact does bad timing have for this individual? The chart below shows what happened if the individual started in 1973 (red line), 1974 (blue line) or 1975 (green line). The chart was developed using historical returns over that time period. Overall market conditions and inflation affected all three about the same. The chance of making the portfolio last for 30 years depended heavily on what happened to the stock market in the first few years.

Something to take into account when planning to retire. Green is good.

Green is Good


2 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *