What Rate of Return do You Need on Your Investments? Ep #86

<p>The average non-smoking 62-year-old couple has a life expectancy of 30 years (living until age 92). That means the average couple needs to plan for a 30-year retirement. So how do you calculate the Rate of Return (RoR) that you need to make on your investments to fully fund your retirement? </p> <p>Calculating the RoR you need is one of the most crucial elements of retirement planning. You don't want to find yourself out of money and living solely on social security in your late 80s. So in today’s episode of the Retirement Made Easy podcast, we cover why calculating your RoR is so important and a few simple ways to look at it. </p> <h2>You will want to hear this episode if you are interested in...</h2> <ul> <li>[3:34] Check out RetirementMadeEasyPodcast.com for FREE resources</li> <li>[5:16] What rate of return do you need in your retirement portfolio?</li> <li>[8:15] What is the “tipping point” of your retirement plan?</li> <li>[10:15] Knowing the RoR you need directs your steps</li> </ul> <h2>What rate of return do you need in your retirement portfolio?</h2> <p>So what do we mean by RoR? Imagine you’re driving from New York to LA. What is your average speed over the trip? A 40 mph average for the trip gives you time to pull over, do some sightseeing, eat lunch, get gas, etc. But if we figure out that you need to make an average speed of 75 mph to get to LA on time—is that manageable at all? I don’t think so. I would tell someone they’d need to leave earlier so they can enjoy the journey.</p> <p>Your retirement plan might say that you only need an average RoR of 3–5% per year. Are those numbers achievable? It all depends on how you invest your portfolio. What if you completed the assessment and it said you needed an average RoR of 9% per year? Based on my opinion, you’d have to wait to retire. You need to save more for retirement. </p> <h2>What is your RoR tipping point? </h2> <p>There is always a tipping point in these assessments. Your plan may look great at 5–6% and look horrible at 3–4%. Finding that mini