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8-10% rate of return in the last 18 months

Discussion in 'TUG Lounge' started by DancingWaters, May 26, 2019.

  1. DancingWaters

    DancingWaters TUG Member

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    Tuggers,
    I keep hearing on radio programs that we should be getting 8-10% rate of returns and your money should double in 7 years. Is that your situation? We are not and we have our investments at Edward Jones. Mainly, Franklin Templeton and American. I have a Disney which has blossomed
     
  2. SmithOp

    SmithOp TUG Member

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    9.4% on my Fidelity Freedom 401k funds. I have it all in 2025 Target Date fund, set it and forget it years ago, I’m a hands off investor. They said pick the date you will retire, but I picked the date I will be 70-1/2 and have to take RMDs.


    Sent from my iPad using Tapatalk Pro
     
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  3. zinger1457

    zinger1457 Guest

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    The 'rule of 72' gives you a good estimate of how long it will take your investment to double with a given interest rate. Just divide 72 by the interest rate, at 8% it will double in 9 years, at 10% about 7 years.

    The 10% expected return is the average over the long term, 2018 was not a great year for the stock market, the S&P 500 was down ~6%.
     
    Last edited: May 26, 2019
  4. artringwald

    artringwald TUG Member

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    Your investment can easily double in 7 years if it's 100% invested in an SP500 mutual fund with a low expense ratio. However, the stock market is unpredictable and can have long downturns. Anybody that will need to withdraw from their investment in less than 5-10 years should put at least part of their investment in funds that are less volatile. The fees that financial advisers charge can have a big effect on your gains. Financial advisers can make it seem much more complicated than it needs to be. Companies like Vanguard makes it easy to make your own investment decisions. Target date funds are an excellent way to do hands free investing.
     
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  5. geekette

    geekette Guest

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    Over the long haul, sure, but I don't see 8-10% each year. My dividend income grows at around that level per year but stock prices bounce around too much to ever have only-ever-up. I have doubled my money since 2010 but I don't expect it to double on a schedule. my concern is with the income vs portfolio value.

    I would never invest in something allegedly guaranteeing such a return, either. Invest to your comfort level. Just because someone says something is possible, doesn't mean it is as they can easily cherry pick some investment that did as they said, which proves nothing about their prowess.
     
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  6. BJRSanDiego

    BJRSanDiego TUG Member

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    I think that the average rate of return for S&P500 for the last 70 years has been 7%. If I'm wrong, perhaps someone will opine.
     
  7. VacationForever

    VacationForever Tug Review Crew: Rookie TUG Member

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    Our managed portfolio growth projection is 5.25% long term. We can live with that, assuming 3% inflation, it will grow 2.25% in Net Present Value.
     
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  8. artringwald

    artringwald TUG Member

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    I believe you're right. This article says over nearly the last century, the stock market’s average return is about 10% annually.

    https://www.nerdwallet.com/blog/investing/average-stock-market-return/

    Here's what the SP500 and Dow have done over the past 25 years, now almost 7 times what they were in 1994, but with some serious setbacks.

    upload_2019-5-28_3-57-1.png
     
  9. TravelTime

    TravelTime TUG Member

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    Stocks have always had the best long term return. I think measuring it by 7 or 8 years may be rather short term since stocks are so volatile. However, if you have a long time horizon and don’t need to sell at any particular time (and can wait out the valleys), then stock is the way to go. 10% has always been the so-called average long term annual return rate on stocks. They were throwing around this number back in the 1980s when I started investing. From 2008 until now has been phenomenally great only because of the stock market crash. Also note on the graph that the return from the late 1990s through the 2008 was not that great compared to 2008 until 2018. That is why I think even 10 years is a short time horizon. Because if you compare the entire time period over the past 20 years, the outcome is completely different.
     
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  10. DancingWaters

    DancingWaters TUG Member

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    I appreciate the knowledgeable tuggers chiming in. The secondary situation is that half of my pension is in a 403B. I was told that social security will not count that part of my $$$ when my husband starts his SS. With the part of the pension I am drawing SS will count that, and I won’t get half of his SS because of the windfall. I wanted to take the 403B part of my pension through the same pension as I am getting the other half from. But they may count that 403B THEN, and I wouldn’t get any of my husbands SS. So.......waiting til my husband is 66 to start drawing is the only way we KNOW for sure how they count that 403B. I don’t want to lose my part of his SS by making the wrong move with the 403B. So right now the 403B is in a nationwide account managed by me. I would like some extra monthly money now, but the uncertainty. The 403B is just not growing like I was told it would.
     
  11. rapmarks

    rapmarks TUG Review Crew: Elite TUG Member

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    I am unaware that social security takes away benefits because of a withdrawal from a retirement account.
    They do take away money in certain states if you are on a government pension.
     
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  12. SmithOp

    SmithOp TUG Member

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    I don’t think the 403b withdrawals will affect the amount of spousal SS you get, it will only affect how much of your SS is taxed when you file. The 403b payments will be reported on a separate 1099R from your pension payment. The size of your pension only is what may eliminate some or all of your spousal SS.

    It sounds like you are a retired teacher who did not pay into SS. The provisions you are referring to are GPO - Govt Pension Offset and WEP Windfall Elimination Provision.

    This flyer from CalSTRS explains them both.

    https://www.calstrs.com/sites/main/files/file-attachments/socialsecurity2019.pdf


    Sent from my iPad using Tapatalk Pro
     
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  13. rapmarks

    rapmarks TUG Review Crew: Elite TUG Member

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    My neighbor is from Ohio, she had a secretarial position for the county and is subject to the windfall provision. When her husband died they petitioned and got a dispensation. This spring she received a letter stating she had to return 6000 dollars to social security. They are only allowing her $450 a month social security because of her very small pension from the county. She also worked in Florida for twenty years. This may be what dancingwaters is referring to.
     
  14. geekette

    geekette Guest

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    CONFUSING! Others understand things I don't, but 403b is akin to 401k, so I'm wondering if you got into a place on pension but they quit offering it and converted to defined contribution (403b).

    You can't ever count on what someone tells you will happen with your money unless it is in CDs or bonds, which are investments with defined outcomes and dates.

    I don't know anything about how your 403b under your control is deployed, but you mention Disney so it sounds like you can purchase individual stocks? what is the trade fee to do so, and are you able to reinvest dividends, without charge, including fractional shares? One reason that I am a dividend investor is that by reinvesting dividends, I have more shares than I bought. people define Growth in different ways. I like more income each year, which I get because of dividend growth (raises granted by BODs) and by reinvesting dividends into new shares. If you are looking for overall portfolio value to grow by a certain amount annually, it's going to depend on what you own and if it is a fund of some kind, what is their objective?

    Start with your goals, then work back into how you should be invested to meet the goals. Add heap of salt to what money managers tell you. Nobody cares about your money more than you.
     
  15. dsmrp

    dsmrp TUG Member

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    Assuming a 1% management fee, is your net growth projection still 5.25%, or between to 4 to 5% ? My husband is debating the value of active managed funds vs "passive" index funds.
     
  16. VacationForever

    VacationForever Tug Review Crew: Rookie TUG Member

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    5.25% after. We pay 0.8% in management fees.
     
  17. DancingWaters

    DancingWaters TUG Member

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    I am a retired teacher in Ohio. I wish I wouldn’t have been talked into splitting my pension. I would be receiving 4 times the monthly pension compared to what I’m getting now, but I wouldn’t have the 403B lump sum. Adding the 403B would only get me up to 50% of what I should have gotten, If I don’t add my 403B I will get part of my husbands SS. My financial guy says splitting my pension was a good thing but I don’t see it that way. They only way to get close to the pension I earned is getting my husbands SS. It makes me feel like I screwed up what I earned. The 401B was not worth as much as keeping the money all together. I wouldn’t have needed my husbands SS, nor would I have gotten it because my pension was too much. So depressing!,,
     
  18. DancingWaters

    DancingWaters TUG Member

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    With that chart above, I would have thought that I would have grown more$. I’m going to call nationwide and see what they think
     
  19. DancingWaters

    DancingWaters TUG Member

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    This 401B is my only hope of having the monthly $$$$ I earned and just screwed up my pension by splitting it.
     
  20. TravelTime

    TravelTime TUG Member

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    I believe all married couples only get half of the second SS benefit. I looked this up for my husband and I and the first retiree gets 100% but the second only gets 50%. This is a good reminder actually for me to research a bit more and see who should collect first.
     
  21. TravelTime

    TravelTime TUG Member

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  22. TravelTime

    TravelTime TUG Member

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    Me too but the stock market crash in 2008 set us all backwards for the decade and then we got our second wind from 2008 until now.
     
  23. Big Matt

    Big Matt TUG Review Crew: Veteran TUG Member

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    Make sure that you are counting dividends when you look at return.

    You may want to consider some alternative investments like real estate (rental properties) in addition to traditional investments in stocks and bonds.
     
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  24. TravelTime

    TravelTime TUG Member

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    I have not counted dividend in our returns. Then our returns would be a lot higher. We have a lot of dividends now that Apple stock is paying out.
     
  25. DancingWaters

    DancingWaters TUG Member

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    I called Nationwide, the company that has this money, though it’s thru State Teachers Retirement. I asked about the rate of return and right now it is at 16.3. She said that doesn’t mean much enlight of what we lost. The previous years the ROR was 5-7%. So I turned it over to them to manage. Our Edward Jones guy wanted it, but until my husband starts his SS, I’m afraid to move it. So, I hope with the professionals my account will begin to look better. After your comments and calling them, I decided I didn’t know enough about investing to continue on my own. I can change it back anytime I want so we will see how they do compared to me moving the money around.
     

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