Page 82 - Ready Set Retire

Stephen J. Kelley
However, if I ran an income plan for someone based on an
11% assumption, in my opinion, I should be carted off to jail!
I aim to be VERY conservative in my estimates; I would much
rather under-promise and over-perform, especially where my
clients’ livelihoods are concerned. Most of my models are run
at around 3% rate of return. My thinking is, if I can make it
work at 3%, no one will complain if we get 5, 6, or even 8%.
However, if I rely on 11% based on historical performance,
and we fail to deliver, no one will be very happy, especially the
client. Also, this inefficiency is very expensive, as shown in
Figure 6: Math vs. Money--the impact of losses, on page 54.
Next time you thing about purchasing a low-cost indexed
fund, you might want to keep this in mind!
Back to the subject at hand. I modeled an approach we call the
“Roth Advantage™” on the 401k funds, and got this result:

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