Growth models. What % do you use?

[Andy_B]

First, I believe growth models are relatively useless because of the rolle coaster like ride of most investments.

That being said, one still needs to get a rough idea of where one will be in the coming decades to determine how much to save/invest today to meet what ever goals you might have.

What % growth do people on here use in their models?

I have used a 6% growth model for my portfolio. It is a bit conservative (especially no accounting for inflation), but I would much rather be conservative when modeling.

For my expense growth (ie how much I will be spending come retirement), I usually take what I am spending per month and tack on 4% per year.

I then use the expense growth and the portfolio growth to determine when I can retire and not have money run out before I retire.

I am more comfortable predicting my portfolio growth that I am my expense growth.

Andy

[bostonsoccermdl]

A family member who is retired and rather conservative, likes to aim closer to 8-10%. He uses an advisor that comes highly reccomended, and has delivered this on average throughout the years (from what I was told.) This is through a diversified portfolio primarily of actively managed mutual funds both equity and fixed income.

[Sachin]

Although 8%-10% minus inflation is closer to 6% in reality.

I go with 6% to take inflation into account.

Sachin

[Andy_B]

Is what I am doing logical?

1) Use 6% growth for portfolio
2) Track expense growth using a 4% inflation

I guess I get confused a bit when people talk about inflation and portfolio growth. Do people factor inflation into their growth models so that they can have a better idea of what the money would be like in todays $'s?

If that is so, I am probably ok with my system, because I track my expense growth which covers inflation so that I can see what I am spending in tomorrows dollars.

Just a matter of perspective I guess

Andy

[bostonsoccermdl]

Is what I am doing logical?


I'll let Sachin or someone else handle this. It looks right to me, but my world is more in the stock trading area.

[Real Ray]

I used to be a trustee on my previous employer's 401K plan, and we used 8% for growth in portfolio. From all the advice and information I used to hear/read. I think that's about right. It's what I use, anyway.