[quote=SK in CV]So what you’re showing there is if the annual pension payments are invested every year for 30 years it will be worth that much? That’s not the same as retiring with a $3 million 401K.
For it to be equivilent to a $3 million 401K, you have to start with $3 million and reduce it every year by the $100K and add investment income. I don’t have to do the calculation. I know that 7.5% annual investment return will yield $225K a year without ever reducing principle.
But I did the calc. $1,250,000 with annual withdrawals of $100K on the first day of the year, 7.5% earnings will last for more than 40 years.[/quote]
I see you’re adding in the anual investment return for the 401k side. I didn’t do that. If you add in investment return, then you’re adding risk. BTW, where can I invest that guarantee 7.5% for 30 years? I S&P didn’t do that between 1950-1980. It’s definitely below its 2000 value. Will we cross the 2000 value in nominal term any time soon? I have no idea. This is why I assume 0% investment return. There are so many variables. If you retired in 2000 and you put your money in index S&P, you lost money in nominal term over the last 12 years. I haven’t even counted inflation or the expected 7.5% return.
