The sponsors of private plans must therefore contribute much more for every dollar of promised benefits than governments contribute to teacher pension plans that value liabilities using an 8 percent
assumed return on portfolios heavily weighted with stocks, hedge funds, or private equity.
Virtually all professional economists agree that calculating the value of guaranteed pension benefits using
the assumed return on a portfolio of risky assets «understate [s] their pension liabilities and the costs of providing pensions to public - sector workers.»
Not exact matches
As for recouping your investment — I am
assuming since this is Mark Cubans Economic Stimulus plan and not Mark Cubans build my
portfolio plan — a
return on your investment over three years plus capitalized interest of that equal to that which would be earned in a money market fund should suffice.
To
return to our example of replacing a # 25,000 salary with passive income, if I invested mainly in shares and rental property and only diversified the
portfolio into fixed income such as bonds in my final years of saving, I'd plan
on investing around # 7,000 a year into shares for 25 years,
assuming a pretty aggressive inflation - adjusted annual
return of 7 %.
It
assumes an average
return of 6 %
on an initial
portfolio of $ 250,000 less an annual fee of 0.30 % for Vanguard Personal Advisor Services and the industry average annual advisor fee of 1.02 %.
We
assume that our
portfolios will produce 10 % - a-year
returns, so we figure we can count
on a $ 100,000
portfolio to throw off about $ 10,000 a year in income.
Let's
assume a
portfolio of 100 % stocks will
return 6 %, and a
portfolio of 100 % bonds will
return 3 %
on an annualized basis.
These
returns are annualized, and they
assume the
portfolio was rebalanced
on January 1 of both 2012 and 2013:
In subsequent articles I will conduct some calculations that
assume dividends are reinvested annually, but all the
portfolio growth and spending assumptions are still
on a total
return basis.
The Examples
assume: (1) you invest $ 10,000 in the noted class of Units in the noted Investment
Portfolio for the time periods indicated; (2) your investment has a 5 %
return each year; (3) the Investment
Portfolio's operating expenses remain the same (including the operating expenses of the Underlying Fund (s)-RRB-; (4) all Units redeemed, if any as noted, are used to pay Qualified Higher Education Expenses (the table does not consider the impact of any potential state or federal taxes
on the redemption); (5) you pay the applicable maximum Initial Sales Charge
on Class A Units and any CDSC applicable to Units invested for the applicable periods in Class C Units; and (6) for the Class C Units Example, the Class C Units converted to Class A Units at the end of sixth year and were thereafter subject to the costs associated with Class A Units.
Extrapolating the median 20 - year difference in annual
returns observed by Cambridge Associates
on an investment
portfolio of $ 50,000, with $ 5,000 contributed annually over a 45 - year period (
assuming quarterly interest compounding) implies a
portfolio value spread of approximately $ 4 million at the end of the period.
On the other hand, the return on the e-Series portfolios assume the investor had a perfectly balanced portfolio on January 1 and didn't make any clever moves during the yea
On the other hand, the
return on the e-Series portfolios assume the investor had a perfectly balanced portfolio on January 1 and didn't make any clever moves during the yea
on the e-Series
portfolios assume the investor had a perfectly balanced
portfolio on January 1 and didn't make any clever moves during the yea
on January 1 and didn't make any clever moves during the year.
«I also
assumed returns of 6 % gross annually
on her RRSP, as well as a very conservative 2 % net
return on her non-registered investments — much lower than the 15 % average annual rate of
return she's received from her investment
portfolio up until now.»
This is because we're
assuming reasonable long - term rates of
return on a normal, sane, rational, well - diversified investment
portfolio.
While the guaranteed rate of
return on the cash value may be lower than other financial products, it can lower the overall volatility of a
portfolio (though this benefit
assumes you have a breadth of existing investments).