Jul 2005
Suppose that Jack Smith retired at the beginning of 1973, invested his retirement nest egg in the S&P 500, and withdrew 5% of his initial balance, adjusted for inflation, each year. As it turns out, Jack would have exhausted his portfolio in less than 20 years. Now consider the case of Jack’s younger brother, Frank. Frank retired at the beginning of 1975, also invested his retirement savings in the S&P 500, and also withdrew 5% of his initial value, adjusted for inflation, each year. After 20 years, Frank’s portfolio would have grown to nearly eight times its original size. Are you surprised how large a difference just two years can make?