Key insights
- The post discusses retirement planning using real return rates and inflation-adjusted contributions. While the approach is valid in theory, its success depends heavily on the accuracy of the assumed real return rate and inflation forecasts. Unexpectedly high inflation or lower-than-projected returns could jeopardize the retirement goal. The strategy is slightly bearish as it prioritizes current lifestyle spending over potentially higher future retirement savings.
I like to use real return rates (6%) for projecting potential retirement balances. Since I use real rate, I use a flat investment amount (20% of current pay) for projections. Based on these, I hit my retirement number at 55.
Now I am looking to increase my lifestyle spending. My thought is to take my current investment amount and only increase it by the rate of inflation every year moving forward, increasing lifestyle spending as I receive pay increases.
Using this logic, will my projections still hold up?