September proved to be a difficult month with no lack of worrying headlines. First, there was the Evergrande debt problem. Secondly, inflation concerns flared up again. Finally, we had the recurrent theme of an impending US government shutdown that was only averted at the last minute. Almost all asset classes were down for the month and there was really no place to hide. Below is the model performance of large accounts maintained with iFAST.
Let's see how our retirement heroes are faring at the end of September 2021.
John, 30 years old, looking to retire in 20 years
John invested USD 40K upfront at the beginning of November 2020 and he contributed USD 500 every month subsequently. As of the end of Sep 2021, he has contributed USD 45K and he is currently sitting on some comfortable profits of USD 6K even after taking into consideration the losses this month. If he sticks to his plan, he can expect to withdraw USD 7.5K every month when he retires in 20 years without ever depleting his retirement nest egg.
Paul, 50 years old, looking to retire in 10 years
Like John, Paul invested USD 40K upfront at the beginning of November 2020. However, he knows he has a shorter runway than John to compound his portfolio. The good thing is that he has a higher income than John so he contributes USD 4K every month subsequently. As of the end of Sep 2021, he has contributed USD 80K and currently sits on some comfortable profits of USD 7K even after taking into consideration the losses this month. If he sticks to his plan, he can expect to withdraw USD 9.5K every month when he retires in 10 years without ever depleting his retirement nest egg.
Sam, 65 years old, already retired
Sam doesn’t have any runway to compound his wealth as he is already retired. Fortunately for him, he had accumulated USD 1M of savings which he invested upfront at the beginning of November 2020 and started to draw out USD 10K every month from this portfolio. As of the end of Sep 2021, he has already drawn a total of USD 110K but his portfolio is still worth USD 1.04M even after a bruising month. In fact, he can expect to continue drawing USD 10K every month while his portfolio value remains about the same. This is a 12% withdrawal rate in a retirement account that never depletes.
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