You want some ugly math? Look at public pensions. They assume an expected rate of return above seven percent.
What if that’s not met? In the real world, there are consequences.
Take, for example, a million-dollar portfolio. If you “need” a return of seventy thousand, or seven percent, what happens if you don’t get it? You’re underfunded. A more reasonable expectation would be, say, four percent, or forty thousand.
Pensions are invested in a mix of bonds and stocks, so getting stock market returns is basically impossible. In the above example, an actual return of four percent leaves a deficit of thirty-thousand.
Now, I want you to relate this math to your situation. If you have a job that pays thirty thousand, and you can safely get four percent on your money, continuing to work is like having $750,000 invested. That’s real money.
Originally posted on Your Survival Guy.
