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Investor 1
- $500,000 investment
- 7.4% average annual return
- 4% withdrawals, increasing 3% each year
- Negative returns during early years
- Ran out of money in year 24
- Positive returns in later years were not enough to sustain income
Investor 2
- $500,000 investment
- 7.4% average annual return
- 4% withdrawals, increasing 3% each year
- Positive returns early in retirement
- Still had substantial cash value, even with negative returns in later years
- Will likely have a legacy to leave behind
Related: 60/40 Portfolio Returns
Source: This hypothetical is for illustrative purposes only and does not reflect the performance of any product. Investor 1’s portfolio is based on S&P 500 Index returns, price only (dividends not reinvested), from January 1, 1969, to December 31, 1993. Investor 2’s portfolio is based on reversing the order of Investor 1’s returns. Average annual return is a simple average of the yearly returns and does not account for cash flows. Indices are unmanaged and unavailable for direct investment. Past performance does not indicate future results.
LCN-6306131-013024