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Originally Posted by Russ_Boston
Assuming a 5% rate of return in perpetuity is one of the reasons we have collapsed. But for planning purposes only i guess it's fine.
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Russ I've owned the home I live in for 25 years. It's in NYC, which could be a factor. It has appreciated at a compounded rate of 9% since 1983. I am starting with the original sale price, and ending with an offer on the property I just received. That growth rate factors in all of the ups and downs of the market since 1983, including the most recent. In fact, it was on track for an 11% rate until 2006 when things leveled off and then started retreating.
Since the other property I have in my plan is only 2 miles from my original house, I think 5% is a reasonable planning number. I purchased it in January of 07, so it saw some of the recent market adjustments in the purchase price, but it's devalued some since then I'd guess. So again, seems reasonable to me to plan at 5%. I am not as sure about the property in FL - perhaps 5% is too aggressive there. But my plan calls for me to keep that property and dump the one in NYC in 10 or so years.
Certainly if you keep the values in your spreadsheet flat, you will be better off when it's time to cash in your chips. It should offer you a decent cushion in the future.
I am using 4% for inflation, and my financial advisor says that's high. Amazing what a few points can do to the plan! If I change to 3.5% (which is the prevailing inflation rate for most of the 20th century according to one website I found) I can live a lot longer before running out of money.
Anyway, I think the key to being sure you have the right means to retire comes with the planning (along with a few bucks of course), and it sounds like your spreadsheet will do the job for you. Good luck!