First 7% isn't conservative when you are talking a mix of bonds and stocks. I would be surprised if you could put more than 25% in stocks.
* The averaged annualized return of FFFEX-Fidelity Freedom Fund 2030 (target retirement age of 2030), since inception, is 8.80%. * The average annualized return of FFFAX-Fidelity Freedom Income Fund (targeted at people currently retired), since inception is 6.56%.
* Take the average of those two, since most people will fall somewhere in the middle and a 7% assumption is not unreasonable at all.
So say you can withdraw $1K per month (not much, especially when you consider 30 years of inflation), $12K a year. You've got 8 years (assuming you do real well with your investments, maybe 10, 11 years). Then you go to your reduced SS benefit payments.
It may not be much, but it's still alot more than if you decided not to invest that money in the market. The alternative is to leave your money with the current social security system and earn only 2% per year.
So which option do you prefer:
1) earn 2%, which will net you $40,568, or
2) earn 7%, which will net you $94,461.
It's a pretty simple choice to me. I want to higher return. The only wrinkle again, really boils down to how much Bush plans on cutting my benefits. It the NPV of the benefit cut exceeds the NPV I get out of investing in the market, then I won't divert any funds. Everyone should make this decision for themselves, very dispassionately.
This is not about partisan politics. This is very simply about what is best for each of you as individuals. Once you know how to do the math, the rest should become a simple decision making process. |
