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  • #16

    but whats SORR
    Click to expand...

    Sequence of Returns Risk.  You have some reading to do on the topic.  Basically it is that if you enter retirement with a bad (think 10 year) low market return as you are withdrawing from your pot, you deplete your resources prior to the market recovery.  Then your retirement pot will not have enough in it to last your remaining years.


    • #17
      One reason to use a savings target based on gross income rather than net, is because most of your investments will be pre-tax.  So you should calculate what your current expenses are, including taxes, and use that as your target.  It's not exact, because some of your savings will be in Roths, and your tax rate in retirement will probably be less ( but the laws may change, so again, who knows ...) but it's close enough, and if you end up with a bit extra saved, it won't be a problem.

      Keep in mind that small changes in your assumptions will lead to vastly different outcomes.

      Historic return on stock market= 10.5%.   Expected in the near future= 7%.  Bu this is just a guess.

      Inflation will knock off 2-3%.  Currently 2%.   So 7% - 2% = 5%.    So,your 6% is reasonable, but the range could be 4%-8.5%.   Or not.  So don't worry too much about the details.  It's all just a rough estimate.

      I use the investment calculator at  Calculator is on the upper right , under "additional resources".


      SORR:  Sequence of returns risk.  It means that if the stock market goes up more than expected early on, you'll come out ahead of what your plans showed, even if it corrects back down later.  BUT if it goes down early in your retirement, then you'll burn up your capital , and by the time the stock market goes back up, you won't have any money left to benefit from the subsequent rise.


      • #18
        Timely post in reference to SORR:


        • #19
          WCICON24 EarlyBird
          Spreadsheets are your friend here.

          I have a portfolio tracking spreadsheet that I update every few months, able to download data from various brokerages and manually input a few balances and gives me all my balances, allocation US/Intl/Bonds/Cash per account and overall, split into taxable, pretax, Roth, 529s.

          Another sheet pulls that current balance data and allows me to do projections as ENT doc has described, for instance I can see a projected 529 balance for a given date and return, or enter a target future balance and get a necessary monthly payment from that.

          I like to see projections of taxable, pretax, and Roth for ages 50, 60, 70. And 529s for each kid freshman year.