As the saying goes "It's difficult to make predictions, especially about the future" (attributed to either Niels Bohr or Yogi Berra, but probably said by nearly everyone who has ever tried to guess what will happen in future, only to have reality bite them in the arse when they least expect it).
And as ASIC suggest in RG53 8.2.3 any financial predictions should include a disclaimer such as:
"Investments can go up and down. Past performance is not necessarily indicative of future performance."
With those provisos in mind, what realistic targets/projections can I make about my future NW trajectory?
Looking at the monthly NW data in Networthshare, over the past 18 years (after adjusting for the one-off increase in NW caused by my 'inheritance' of the lake house from my parents) my average monthly change in NW has been $9,250 (or around $111K pa). However the years covering the GFC and EFC produced average monthly decreases of $35,755 (ouch!) and $9,905 respectively. If one excludes those two years (as being unlikely to occur every decade), the average monthly NW increase rises to $13,266 (or $159K pa), which is close to my average monthly NW change during the past nine years of $14,953 (or $179K pa).
The monthly NW increase is due to a combination of my savings rate and the total growth (income plus capital gain) produced by my investments, so will generally increase over time. My salary (and savings rate) has remained fairly constant over the past decade (around $100K salary and 30% of gross salary saved), whereas the total growth in my investments should be exponential (as compound interest results in exponential growth),
Over the next decade or so, leading up to retirement, my salary and savings rate should stay roughly the same (barring unemployment, disability etc.), so I might aim for averaging $180K pa increase in NW, resulting in around $4.6M by age 70. During retirement I plan to withdraw around $65K pa to replace my current take-home pay, and will also cease adding $25K pa to my retirement savings (SGL/SS contributions into superannuation), so the net effect will be to reduce NW accumulation by around $90K pa, to somewhere around $90K pa net. So, possible NW targets during retirement are $5.5M by age 80 and $6.4M by age 90 (if I live that long). Of course these figures are in current $ terms, so after adjusting for inflation my NW in today's $ might rise to $4M by the time I retire, and then remain there in 'real' (inflation adjusted) terms.
We'll see how things turn out in reality of the next 2-3 decades...
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