Our Net Worth Change Since Retiring

A reader asked, "Has your net worth increased or decreased since you retired? I am curious because you have gone through an entire economic cycle since retirement."

The short answer is my net worth has decreased slightly since I retired in 2007..

Here is the long answer;

I retired in early October 2007, and had a liquid net worth summary from the end of September 2007.  I compared the September 2007 value to the December 2016 value.  For reference, I don't include our house in the liquid net worth calculations.  Also, I adjusted the number to exclude any one time windfalls, such as an inheritance.

In December 2016, our liquid net worth was 94% of what is was in September 2007, representing a decline of  6%.  This compares to a bottom of 64% which occurred in June 2009. For reference, this calculation also includes 9 years of living expense withdrawals from our retirement savings.

What does this mean for our future retirement finances?  Here are my thoughts:

Overall, even with a conservative strategy, the investment return was close to matching our living expenses for the past 9 years. This is a pretty good result.  For this situation, our retirement savings will never run out in our lifetime.  For a hypothetical case where investment returns and withdrawal growth match inflation (i.e. real return is zero), our savings will last 26 years for a 4% withdrawal and 35 years for a 3% withdrawal. (This analysis is conservative since I have not included Social Security payments in the calculation because we have not reached the minimum age to qualify.)

So, I believe we should continue our investment strategy to preserve capital with returns modestly beating inflation.  This strategy may help avoid a significant decline in funds like the one that happened in 08/09.  In addition, if needed, we can lower our withdrawal rate in poor return years to extend the longevity of our retirement savings.

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This is not financial or retirement advice. Please consult a professional advisor.

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