Your Retirement Nest Egg

In a recent issue of the Wall Street Journal, there was an excellent retirement article. In it, the author responded to a reader’s question “How much does my nest egg need to be?”. Your retirement nest egg is very important! So, we prepared a summary and some additional insights to consider. Our perspective is drawn, in part, from our award-winning research on retirement income planning.

retirement nest egg

Article summary by ETFMathGuy

The article starts with predicting your expenses. This is arguably a difficult task, and where many people stop. But, without this information, there is really no way to estimate the “right size” of a retirement nest egg.

In summary, the article suggests the following calculation.

  1. Start with an estimate of your expenses. A common approach to this is to assume a percent between 60-80% of expenses pre-retirement. This approach assumes that your expenses go down in retirement. That may be true for many retirees, as they no longer have mortgage payments or dependent expenses. Of course, a more precise estimate can be done.
  2. Subtract from this any guaranteed income, such as social security and after-tax pension benefits or annuities.
  3. Take this difference and multiply it by 25. In this article, they assume that a 65-year old lives until 90. This age is a conservative estimate, based on information from the Social Security Administration.

What isn’t stated in the article about your retirement nest egg

While I enjoyed this article, it made some assumptions about your retirement nest egg. For instance, the suggested value doesn’t include uncertain investment returns or inflation. The net effect of including both of these would typically give a retiree more years of retirement income. The extra income would come from a conservative investment in retirement, less inflation. Using a 4% conservative after-tax average return and 3% average inflation, this net effect would provide a 1% gain (on average) each year.

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ETF Math Guy reaching out for the week: Thoughts on ETFs, markets and investing.

A Weekly Newsletter that gives you brief recommendations on ETFs, markets, and investing philosophy. Anything we are enjoying or thinking about is also fair game.

Links on ETFs this week…

This years Inside ETFs conference, is in Hollywood, Florida this week, and includes Hall of Famer Joe Montana. Not sure what Joe knows about ETFs but he knows about winning so cannot hurt to hear him speak.


Delusional ETF Trading with Sarah Newton


This podcast on Bloomberg



The number of ETF’s is extraordinary. One of the reasons we focus on the commission-free ETF’s (besides the free) is that they are also the most liquid ones. Liquidity is an issue not only for your trades but for the ETFs own survival. Legg Mason is closing 3 ETFs this week and analysts believe the number of ETF liquidations could top 1,000 in 2019.

What I’m reading (listening) to this week

The invisible Hands by Stephen Drobny

In the same format as Market Wizards by Jack Schwager, but the interviewee is anonymous. Some of the interviews are more academic in nature as compared to the Market Wizards genre which tends to be more focused on trading. The book is almost 10 years old, so some of the subjects on current events (2011 copyright) are not that relevant. The thought process is what is most relevant. How do these money managers think about markets and structure their trades accordingly.

Market Thoughts…

“A position that is going with you tends to keep going with you and your initial estimate of the move may have been conservative. A loss by overstaying a market is not one of the common mistakes. In fact, holding a profitable position a little longer will win far more often than it will lose. The big risk is closing a good position too soon.”

Amos Hostetter

Founder, Commodities Corp.

If you have thoughts or comments, please click here to reach out to us.

2018 ETF Performance Review

Welcome to the 2018 ETF performance review.

It was a difficult year for a number of asset classes. The figure here shows that only a few ETFs had positive returns in 2018, using commission-free ETFs available from Fidelity. Based on broad indices for the stock, bond and cash asset classes, and including dividends, stocks lost 4.5%. Bonds barely broke even, returning 0.1% for the 2018 calendar year. The best performing broad market index was cash, which returned 1.7% for the year.

Fidelity-2018

Download here

Here is your 2018 ETF performance review. It was a difficult year for a number of asset classes, with only a few with positive returns.