Monday, February 17, 2014

You Have to Be A Multi-Millionaire When You Retire

Continuing on the theme of running Monte Carlo Simulations to look at retirement feasibility, I ran a scenario for a person or couple, retiring at 65, with a nest egg of 50% stocks, 40% bonds, and 10% cash, and wanting to spend $120,000 a year in retirement.

Let's assume that CPP and other pension income yield $20,000.  Let's also assume that they will live until they are 90, not out of the question if you reach 65 with today's medical technology.  Also, let's plan for 85%+ probability of success.

Run the Vanguard tool and Presto!  You need to be a multi-millionaire at 65 with a nest egg of $2,100,000 to live on $120,000 with these assumptions.  Pretty sobering thought.
You need $2.1M for your retirement.


  1. Hey Mark, I really enjoy reading your blog. This Vanguard tool is helpful. With interest rates set to raise and forward company PE's around 25 it is unclear what is a good allocation strategy for the next few years.

  2. I would not change your stock allocation % but would rebalance if necessary. There is an interesting new-ish theory that you should reduce your stock allocation somewhat for the last couple of years before retirement and the first few years afterward and increase cash and bonds. The theory is that you are more sensitive to losses in the stock market during this period and you can increase your stock allocation after being in retirement for a few years. I will probably write a blog entry about this theory.


Comments are not moderated prior to posting. Mark