Are You Up to the Challenge?

Whenever someone says to me, “The stock market is crazy.  It goes up and down.  I have no idea if I’m going to be OK.”  “What happens if this Covid thing tanks the economy and I lose all my money?”  (By the way, the market is down only 5% on the year.  The resiliency of the stock market is incredible.)

I think to myself, “But it doesn’t matter.  It just doesn’t matter.  Investing in a diversified portfolio has never not worked.”

So what exactly do I mean by that?

This week I am going to give you a glimpse into the appendix from my book:  The Retirement Revolution: Spend More, Worry Less. 

This data drives much of my advice and beliefs about investing and spending in retirement.   I believe that this data, if truly understood, could take away all of your fears about investing once retired.  I can’t emphasize this enough.  Please take the time to absorb the table below.

Appendix Explanation

The historical data below simply shows you what would have happened if you had retired in any given year (starting in 1931). Each “retirement” is assumed to last 20 years.

The first row reveals what would have happened if someone retired in 1931 with $100,000. The money is invested in the 500 largest companies in the U.S. (otherwise known as the S&P 500 Index).

Starting with $100,000, the chart shows what would have happened if you started withdrawing $5,000 (or 5%) per year beginning the very first year of retirement. In each example, over 20 years, you would have withdrawn a total of $100,000 ($5000 per year for 20 years).

I know this is technical, hang in there.

So, if you retired in 1931, over the next 20 years your money would have grown to $513,210- even though you withdrew 5% of the original investment each year.

Important Points

  1. 100% of the scenarios result in you ending up with more money than you started with.  86 times in a row.
  2. The WORST period illustrated is from 1997-2017. Your original $100,000 would have ended with a value of $145,177 (even though you had been withdrawing $5000 per year for 20 years).
  1. The BEST period illustrated is from 1979-1999. Your original $100,000 would have ended with a value of $1,840,805 (even though you had been withdrawing $5000 per year for 20 years).
  1. The MEDIAN period illustrated is from 1953-1973 where your original investment would have grown to $552,969.
  1. This is absolutely amazing news.
  2. It is statistically correct to say, “Over the past 86 years, if you started with $100,000 and withdrew $5000 per year for 20 years, every time you would have ended up with more than the original investment.”

Hopefully, this blows your mind as much as it did mine!  It doesn’t matter what the stock market is doing. 

Be Blessed,

Dave

Here is the chart.  For example, pick your birth year, or your kid’s birth year.  Imagine if you retired that year and look at the value 20 years later, even though you had been withdrawing 5%.

Starting Retirement DateEnd

Original

Investment

Total Withdrawals (5% per year)Annual Return

Ending

Value

12/31/193112/31/1951$100,000$100,00011.40%$513,210
12/31/193212/31/1952$100,000$100,00013.27%$766,022
12/31/193312/31/1953$100,000$100,00010.15%$386,712
12/31/193412/31/1954$100,000$100,00012.56%$660,031
12/31/193512/31/1955$100,000$100,00010.63%$431,282
12/31/193612/31/1956$100,000$100,0007.84%$219,962
12/31/193712/31/1957$100,000$100,00012.37%$633,616
12/31/193812/31/1958$100,000$100,00012.03%$589,235
12/31/193912/31/1959$100,000$100,00013.08%$735,558
12/31/194012/31/1960$100,000$100,00014.40%$966,123
12/31/194112/31/1961$100,000$100,00016.91%$1,585,122
12/31/194212/31/1962$100,000$100,00015.46%$1,194,776
12/31/194312/31/1963$100,000$100,00015.13%$1,118,421
12/31/194412/31/1964$100,000$100,00014.89%$1,066,591
12/31/194512/31/1965$100,000$100,00013.39%$786,149
12/31/194612/31/1966$100,000$100,00013.87%$867,869
12/31/194712/31/1967$100,000$100,00014.87%$1,062,546
12/31/194812/31/1968$100,000$100,00015.35%$1,169,095
12/31/194912/31/1969$100,000$100,00014.07%$903,770
12/31/195012/31/1970$100,000$100,00012.70%$679,685
12/31/195112/31/1971$100,000$100,00012.15%$604,166
12/31/195212/31/1972$100,000$100,00012.10%$597,148
12/31/195312/31/1973$100,000$100,00011.74%$552,969
12/31/195412/31/1974$100,000$100,0007.97%$227,119
12/31/195512/31/1975$100,000$100,0007.57%$204,629
12/31/195612/31/1976$100,000$100,0008.21%$241,785
12/31/195712/31/1977$100,000$100,0008.98%$292,907
12/31/195812/31/1978$100,000$100,0006.99%$174,859
12/31/195912/31/1979$100,000$100,0007.03%$176,891
12/31/196012/31/1980$100,000$100,0008.38%$252,335
12/31/196112/31/1981$100,000$100,0006.57%$155,386
12/31/196212/31/1982$100,000$100,0008.37%$251,568
12/31/196312/31/1983$100,000$100,0007.80%$217,461
12/31/196412/31/1984$100,000$100,0007.00%$175,399
12/31/196512/31/1985$100,000$100,0007.25%$187,660
12/31/196612/31/1986$100,000$100,0009.36%$321,308
12/31/196712/31/1987$100,000$100,0007.91%$223,717
12/31/196812/31/1988$100,000$100,0007.85%$220,163
12/31/196912/31/1989$100,000$100,00010.32%$402,199
12/31/197012/31/1990$100,000$100,00010.28%$398,713
12/31/197112/31/1991$100,000$100,00010.60%$428,851
12/31/197212/31/1992$100,000$100,0009.60%$340,207
12/31/197312/31/1993$100,000$100,00011.98%$583,058
12/31/197412/31/1994$100,000$100,00014.84%$1,055,377
12/31/197512/31/1995$100,000$100,00014.36%$958,459
12/31/197612/31/1996$100,000$100,00014.00%$891,251
12/31/197712/31/1997$100,000$100,00016.44%$1,447,113
12/31/197812/31/1998$100,000$100,00017.64%$1,818,318
12/31/197912/31/1999$100,000$100,00017.70%$1,840,805
12/31/198012/31/2000$100,000$100,00015.40%$1,180,094
12/31/198112/31/2001$100,000$100,00015.50%$1,202,665
12/31/198212/31/2002$100,000$100,00013.25%$763,294
12/31/198312/31/2003$100,000$100,00013.34%$777,933
12/31/198412/31/2004$100,000$100,00013.75%$845,961
12/31/198512/31/2005$100,000$100,00012.38%$634,571
12/31/198612/31/2006$100,000$100,00012.15%$603,834
12/31/198712/31/2007$100,000$100,00012.30%$624,349
12/31/198812/31/2008$100,000$100,0009.51%$332,734
12/31/198912/31/2009$100,000$100,0008.92%$288,562
12/31/199012/31/2010$100,000$100,00010.00%$373,397
12/31/199112/31/2011$100,000$100,0008.57%$264,524
12/31/199212/31/2012$100,000$100,0008.95%$290,416
12/31/199312/31/2013$100,000$100,0009.73%$350,521
12/31/199412/31/2014$100,000$100,00010.48%$417,526
12/31/199512/31/2015$100,000$100,0008.58%$265,008
12/31/199612/31/2016$100,000$100,0007.76%$214,933
12/31/199712/31/2017$100,000$100,0006.33%$145,177

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