http://retireby35.com/2009/06/401kroth-ira-projected-growth-by-35/ Chronicling my journey to financial freedom Wed, 08 Sep 2010 20:00:28 -0700 http://wordpress.org/?v=abc hourly 1 http://retireby35.com/2009/06/401kroth-ira-projected-growth-by-35/comment-page-1/#comment-29 admin Wed, 01 Jul 2009 13:54:35 +0000 http://retireby35.com/?p=195#comment-29 You're right, I should mention the volatility. Currently I have put my money in a mix of government funds (that has over the long run provided 5%+ in returns), TIPs (due to horizon inflationary concerns), and short-term investment grade funds. I've pulled my money out of the stock market for a while now due to the huge volatility we are having currently. That's not to say I won't slowly put it back in the stock market in the future, but as of right now I still believe we are in a bear market rally. The calculations I made above was just a general guesstimate of where my 401k/Roth IRA would be in 7 years if I don't change my allocation. You’re right, I should mention the volatility. Currently I have put my money in a mix of government funds (that has over the long run provided 5%+ in returns), TIPs (due to horizon inflationary concerns), and short-term investment grade funds. I’ve pulled my money out of the stock market for a while now due to the huge volatility we are having currently. That’s not to say I won’t slowly put it back in the stock market in the future, but as of right now I still believe we are in a bear market rally. The calculations I made above was just a general guesstimate of where my 401k/Roth IRA would be in 7 years if I don’t change my allocation.

]]> http://retireby35.com/2009/06/401kroth-ira-projected-growth-by-35/comment-page-1/#comment-28 Early Retirement Extreme Wed, 01 Jul 2009 02:12:52 +0000 http://retireby35.com/?p=195#comment-28 Hey, nice to see another early-early retiree in the making. I used to do calculations like that, obsessively. It might be worthwhile to consider volatility to get an estimate of future possibilities. 7 years is less than a market cycle and not a long time to estimate "conservative" returns unless of course your allocation itself is conservative, like CDs and bonds where you're pretty much guaranteed what you get. The SP500 has a monthly volatility of 6%, so over 7 years, that's 6*sqrt(7*12)=55%. The gain is 1.05^7 -> 41%. So there's a 68% chance that your returns will be between -14% and +96%. This is from a large sum invested in the beginning. For regular contributions you're approaching the complexity of option pricing models when you take the volatility into account. Hey, nice to see another early-early retiree in the making. I used to do calculations like that, obsessively. It might be worthwhile to consider volatility to get an estimate of future possibilities. 7 years is less than a market cycle and not a long time to estimate “conservative” returns unless of course your allocation itself is conservative, like CDs and bonds where you’re pretty much guaranteed what you get. The SP500 has a monthly volatility of 6%, so over 7 years, that’s 6*sqrt(7*12)=55%. The gain is 1.05^7 -> 41%. So there’s a 68% chance that your returns will be between -14% and +96%. This is from a large sum invested in the beginning. For regular contributions you’re approaching the complexity of option pricing models when you take the volatility into account.

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