Re: The Great Divide
From: Jim Blair (jeb_at_wisc.edu)
Date: 07/28/04
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Date: Wed, 28 Jul 2004 14:36:29 -0500
"William F Hummel" <wfhummel@comcast.net> wrote in message
news:j0lfg0hgrdmg440nova8v5sqfci5ina47g@4ax.com...
> The Great Divide
>
> Some day if you are lucky or clever or thrifty enough, you may amass
> enough financial wealth to cross the Great Divide. That is where your
> investment income exceeds your living expenses.
.....
>
> Obviously only a small fraction of the population can cross that
> divide.
.....
> How much capital is required to realize that much income? That
> depends upon how conservative you are as an investor. The long-term
> average annualized return on equities is about 10% versus about 5% on
> bonds. Using those figures, and assuming you split your financial
> assets equally between stocks and bonds, the gross annual return would
> be about 7.5%. Thus the required capital would be $100,000/.075 =
> $1,333,000.
>
> With a more modest living standard, say spending of $40,000 per year
> exclusive of income taxes, and using the same assumptions on
> investments, the required gross income would be $53,300, which would
> imply investment capital of about $710,000.
Hi,
There was a claim made on this NG recently that this takes millions and that
only a tiny fraction of the population can retire in comfort.
Your figures are closer to the reality, but you neglect Social Security and
pensions.
For most people, if they have from 0.5 to 1.5 million dollars when they
reach age
65 (or when they can collect full SS) they will be OK. And figures I have
seen indicate
that about half of the population is on track for that.
,,,,,,,
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