Coincidental Coincidences

This will be fun and starts off with a coincidental Tweet about something we looked at the other day, sizing equities correctly. 

Cullen then replies;

From there, this guy Brad appears to actually get mad at Cullen for essentially saying "don't forget about inflation." Click through, do you think it's a bit or is Brad actually mad?

Obviously, a lot would have to go wrong to exhaust $10 million in most circumstances but it is important to understand price inflation and why more attainable relatively large numbers might not be the golden ticket that they first appear to be.

However much you end up with will simply be a source of income. If sustaining that source is important then taking 4-5% will be about it. Having $2 million accumulated at retirement age is nothing to scoff at, most people will not have that much in today's dollars. The income available to mostly ensure sustainability is $80,000-$100,000 which again, that's pretty good but not killing it. 

Combining that $80,000-$100,000 with $50,000 in Social Security is pretty comfortable I think and will get the job done for plenty of people but it is not so much that something very expensive, I am thinking health related, couldn't derail that "comfort" quickly. 

The combination of a down market coinciding with something medical that is very expensive and maybe a roof or plumbing catastrophe and that $2 million is going to get much smaller. The market will come back after some period, I would certainly spend the money on a medical problem and I can't imagine there's any getting around a roof or plumbing catastrophe, but the ability to generate the same income could easily be diminished. I wouldn't count on $1.3 million sustainably paying out $100,000 every year.

It's that sort of combination is why we spend so much time on trying to find additional streams of income beyond an investment portfolio and Social Security. Whether anyone thinks of that as working with a negative connotation is up to them but I would say it doesn't have to be negative. 

I started talking about this ages ago and then recently my involvement with the Del E, Webb Foundation just sort of fell out of the sky. It was a volunteer position for what turned out to be almost five years and now as a board member pays a stipend that is not big but big enough to cover a decent chunk of what I expect our fixed monthly expenses to be a few years from now. It would be enough to relieve some of the burden we would otherwise place on our portfolio if I ever decide to retire from my day job. It's the sort of "work" that others in the group have done into their 80's. 

When we talk about these things, I usually include something about being willing to have a long runway to creating an income stream so I think it is a funny coincidence that happened with my Foundation involvement. 

The willingness to play the long game with planning is vitally important to figuring out a successful path through retirement and I don't just mean financially. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.