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 In each example, over 20 years, you would have withdrawn a total of $100,000 ($5000 per year for 20 years).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
- 100% of the scenarios result in you ending up with more money than you started with. 86 times in a row.
- 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).
- 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).
- The MEDIAN period illustrated is from 1953-1973 where your original investment would have grown to $552,969.
- This is absolutely amazing news.
- 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 Date | End |
Original
Investment
| Total Withdrawals (5% per year) | Annual Return |
Ending
Value
|
| 12/31/1931 | 12/31/1951 | $100,000 | $100,000 | 11.40% | $513,210 |
| 12/31/1932 | 12/31/1952 | $100,000 | $100,000 | 13.27% | $766,022 |
| 12/31/1933 | 12/31/1953 | $100,000 | $100,000 | 10.15% | $386,712 |
| 12/31/1934 | 12/31/1954 | $100,000 | $100,000 | 12.56% | $660,031 |
| 12/31/1935 | 12/31/1955 | $100,000 | $100,000 | 10.63% | $431,282 |
| 12/31/1936 | 12/31/1956 | $100,000 | $100,000 | 7.84% | $219,962 |
| 12/31/1937 | 12/31/1957 | $100,000 | $100,000 | 12.37% | $633,616 |
| 12/31/1938 | 12/31/1958 | $100,000 | $100,000 | 12.03% | $589,235 |
| 12/31/1939 | 12/31/1959 | $100,000 | $100,000 | 13.08% | $735,558 |
| 12/31/1940 | 12/31/1960 | $100,000 | $100,000 | 14.40% | $966,123 |
| 12/31/1941 | 12/31/1961 | $100,000 | $100,000 | 16.91% | $1,585,122 |
| 12/31/1942 | 12/31/1962 | $100,000 | $100,000 | 15.46% | $1,194,776 |
| 12/31/1943 | 12/31/1963 | $100,000 | $100,000 | 15.13% | $1,118,421 |
| 12/31/1944 | 12/31/1964 | $100,000 | $100,000 | 14.89% | $1,066,591 |
| 12/31/1945 | 12/31/1965 | $100,000 | $100,000 | 13.39% | $786,149 |
| 12/31/1946 | 12/31/1966 | $100,000 | $100,000 | 13.87% | $867,869 |
| 12/31/1947 | 12/31/1967 | $100,000 | $100,000 | 14.87% | $1,062,546 |
| 12/31/1948 | 12/31/1968 | $100,000 | $100,000 | 15.35% | $1,169,095 |
| 12/31/1949 | 12/31/1969 | $100,000 | $100,000 | 14.07% | $903,770 |
| 12/31/1950 | 12/31/1970 | $100,000 | $100,000 | 12.70% | $679,685 |
| 12/31/1951 | 12/31/1971 | $100,000 | $100,000 | 12.15% | $604,166 |
| 12/31/1952 | 12/31/1972 | $100,000 | $100,000 | 12.10% | $597,148 |
| 12/31/1953 | 12/31/1973 | $100,000 | $100,000 | 11.74% | $552,969 |
| 12/31/1954 | 12/31/1974 | $100,000 | $100,000 | 7.97% | $227,119 |
| 12/31/1955 | 12/31/1975 | $100,000 | $100,000 | 7.57% | $204,629 |
| 12/31/1956 | 12/31/1976 | $100,000 | $100,000 | 8.21% | $241,785 |
| 12/31/1957 | 12/31/1977 | $100,000 | $100,000 | 8.98% | $292,907 |
| 12/31/1958 | 12/31/1978 | $100,000 | $100,000 | 6.99% | $174,859 |
| 12/31/1959 | 12/31/1979 | $100,000 | $100,000 | 7.03% | $176,891 |
| 12/31/1960 | 12/31/1980 | $100,000 | $100,000 | 8.38% | $252,335 |
| 12/31/1961 | 12/31/1981 | $100,000 | $100,000 | 6.57% | $155,386 |
| 12/31/1962 | 12/31/1982 | $100,000 | $100,000 | 8.37% | $251,568 |
| 12/31/1963 | 12/31/1983 | $100,000 | $100,000 | 7.80% | $217,461 |
| 12/31/1964 | 12/31/1984 | $100,000 | $100,000 | 7.00% | $175,399 |
| 12/31/1965 | 12/31/1985 | $100,000 | $100,000 | 7.25% | $187,660 |
| 12/31/1966 | 12/31/1986 | $100,000 | $100,000 | 9.36% | $321,308 |
| 12/31/1967 | 12/31/1987 | $100,000 | $100,000 | 7.91% | $223,717 |
| 12/31/1968 | 12/31/1988 | $100,000 | $100,000 | 7.85% | $220,163 |
| 12/31/1969 | 12/31/1989 | $100,000 | $100,000 | 10.32% | $402,199 |
| 12/31/1970 | 12/31/1990 | $100,000 | $100,000 | 10.28% | $398,713 |
| 12/31/1971 | 12/31/1991 | $100,000 | $100,000 | 10.60% | $428,851 |
| 12/31/1972 | 12/31/1992 | $100,000 | $100,000 | 9.60% | $340,207 |
| 12/31/1973 | 12/31/1993 | $100,000 | $100,000 | 11.98% | $583,058 |
| 12/31/1974 | 12/31/1994 | $100,000 | $100,000 | 14.84% | $1,055,377 |
| 12/31/1975 | 12/31/1995 | $100,000 | $100,000 | 14.36% | $958,459 |
| 12/31/1976 | 12/31/1996 | $100,000 | $100,000 | 14.00% | $891,251 |
| 12/31/1977 | 12/31/1997 | $100,000 | $100,000 | 16.44% | $1,447,113 |
| 12/31/1978 | 12/31/1998 | $100,000 | $100,000 | 17.64% | $1,818,318 |
| 12/31/1979 | 12/31/1999 | $100,000 | $100,000 | 17.70% | $1,840,805 |
| 12/31/1980 | 12/31/2000 | $100,000 | $100,000 | 15.40% | $1,180,094 |
| 12/31/1981 | 12/31/2001 | $100,000 | $100,000 | 15.50% | $1,202,665 |
| 12/31/1982 | 12/31/2002 | $100,000 | $100,000 | 13.25% | $763,294 |
| 12/31/1983 | 12/31/2003 | $100,000 | $100,000 | 13.34% | $777,933 |
| 12/31/1984 | 12/31/2004 | $100,000 | $100,000 | 13.75% | $845,961 |
| 12/31/1985 | 12/31/2005 | $100,000 | $100,000 | 12.38% | $634,571 |
| 12/31/1986 | 12/31/2006 | $100,000 | $100,000 | 12.15% | $603,834 |
| 12/31/1987 | 12/31/2007 | $100,000 | $100,000 | 12.30% | $624,349 |
| 12/31/1988 | 12/31/2008 | $100,000 | $100,000 | 9.51% | $332,734 |
| 12/31/1989 | 12/31/2009 | $100,000 | $100,000 | 8.92% | $288,562 |
| 12/31/1990 | 12/31/2010 | $100,000 | $100,000 | 10.00% | $373,397 |
| 12/31/1991 | 12/31/2011 | $100,000 | $100,000 | 8.57% | $264,524 |
| 12/31/1992 | 12/31/2012 | $100,000 | $100,000 | 8.95% | $290,416 |
| 12/31/1993 | 12/31/2013 | $100,000 | $100,000 | 9.73% | $350,521 |
| 12/31/1994 | 12/31/2014 | $100,000 | $100,000 | 10.48% | $417,526 |
| 12/31/1995 | 12/31/2015 | $100,000 | $100,000 | 8.58% | $265,008 |
| 12/31/1996 | 12/31/2016 | $100,000 | $100,000 | 7.76% | $214,933 |
| 12/31/1997 | 12/31/2017 | $100,000 | $100,000 | 6.33% | $145,177 |
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