Is this true?

Question

Only answer if you really know about this.
Someone claiming to be a stock broker told me that if you put $50,000 every year in mutual bonds/stocks/ and other investments, and you have a return of 20%, after 13 years you will have enough to get $500,000 a year for the rest of your life. What if you put in $15,000?

$15,000 a year that is.

Answer 1

First of all, having a rate of return of 20% over a 13 year span would make you an investing supergenius. It is simply unrealistic to expect those kinds of returns consistently, over that long of a time span. The average rate of return for the S&P 500 between 1950 and 2006 was 8.75%.

But, assuming you could actually get that rate of return consistently over a 13 year period, your $50,000 annual contribution would yield $3,444,762.19 after 13 years, assuming no monthly or daily compounding of interest.

Your $15,000 annual investment under the same scenario would yield $1,033,428.66 at the end of 13 years.

Under the $50,000 contribution scenario, if you planned on drawing retirement funds for 20 years, your annual income could be $589,503.68, so your broker friend is correct, assuming the 20% annual return.

Under the $15,000 contribution scenario, you could expect to be able draw $176,851.10 for 20 years.

Under a more realistic 8.75% return, your $50,000 annual contribution would yield $1,376,501.44 at the end of 13 years, and a $15,000 contribution would give you $412,950.43.

So you could live on $136,196.76 a year with the $50,000, or $40,859.03 with $15,000.

As they always say on the telly, past returns are not a guarantee of future results.

Good luck!

BW$$

Answer 2

Well, you won't get 20% return first of all. The market averages 10%.

Even if it were treu, you would only have 1.3 million after 13 years. So, no, you could not take out 500K each year. It would be gone in a couple of years.

Also, the market may average 10%, but there are ups and downs.

You can do all the math with a very very simple Excel spreadsheet.

If you put $15,000 in a mutual fund averaging 10% each year, you would have $482K after 15 years. In retirement, you should never take out more than 3 or 4% a year. That means that you would be able to safely take out $14K to $19K per year.

So, in short, what you heard was wrong on many many levels.

Answer 3

Yes, that's mathematically true. After 13 years you'd have close to $3 million, so your 20% return would give you over half a million a year without eating into the base amount.
.
The trick is getting that 20% return every year - that's WAY above what any existing fund does. There have been funds that have done that well and much better in any given year, since they've been heavily invested in something that has done extremely well that year, but no funds really have that kind of record over a long period.

If this guy was trying to get you to invest with him, don't even think about it, he's a sleaze and trying to con you - RUN!!!!!

Answer 4

I think this was intended by your broker as an exaggerated scenario to inspire you to invest. Sure 20% is unrealistic. I'm guessing here, but 50k/year is also unrealistic. The idea is to get you excited about the prospects so you'll throw down, which is a good message as long as you do your research and invest wisely. And expect to earn between 6% and 15% over a 13 year period.

After 13 years you'd get to spend $175k per year forever (assuming you kept up that unheard-of 20% return). The point to take to bed is, do not *NOT* invest for retirement.

Answer 5

1. I don't think that anyone has ever returned 20% per year 13 years in a row, especially if you are mixing stocks, bonds and other investments.

2. I think that if you did make 20% 13 years in a row, you would have at least 10% per year inflation.

3. Nobody can predict the stock market or the bond market.

4. If you put in 50,000 per year, for 13 years, that is $650,000.

5. Simple interest of 20% on $50,000 per year for 13 years, will pay $484,966.03 in annual gains after 13 years.

6. Simple interest of 20% on $15,000 per year for 13 years, will pay $145,489.81 in annual gains after 13 years.

7. The hard part is, when you put $50,000.00 in because the market is doing so well, and then it corrects 20% and is now only worth $40,000.00, and your stockbroker still gets his $1,000 fee.

Answer 6

If you have a return of 20% I'll be amazed! Anyone claiming to be a stock broker would need to show me first-class credentials before I'd hand over a dime and even then I'd have reservations about that high a percentage. If you want some really good investment advice try Suze Orman's books which you can find at your local bookstore or library.

Answer 7

I found your question interesting and did some calculations. But first please note that for 20% return over 13 years you will have to be Warren Buffett.

But if we assume you achieve it, then in the end your capital will be $2.91 million, and to get an income of 500K from it you will need a return of 17.2% annually. Hardly possible. It is all very unrealistic.

As regards your $15,000 pa, a realistic calculation would be based on a growth rate of 7% pa. which in the end would then give you an income of $22,600 pa.

Answer 8

and if a cow had wings it could fly. It is extremely unlikely that you will have a fund that makes 20% a year for thirteen years. That is the problem regardles of how much money you invest.

Answer 9

1) Yes.
2) If you put $15,000.00 then you will have almost $150,000.00 after 13 years.

Very important note:
$500,000.00 USD in the year 2017 won't be as much money as $500,000.00 USD in the year 2007

$500,000.00 USD in 1996 are just $390,000.00 USD in 2006

If you want to retire with $500,000.00 ADJUSTED FOR INFLATION then you need to save a little more than $50,000.00 USD each year. (I suggest at least 5% just to be safe)

If you want to retire with $150,000.00 ADJUSTED FOR INFLATION then you need to save a little more than $15,000.00 USD each year. (I suggest at least 5% just to be safe)

If you need a more detailed answer then you can email me. (I am a Portfolio Manager)

Answer 10

a million/2 -authentic !!! that's undemanding to fall in love yet to stay in love is amazingly specific. there is one 2nd in existence once you're with somebody. And sense like the worldwide has stopped and your existence seems suitable, ensure you on no account lose that individual ...... is this actual love ?????