We are now wrapping up Q1-2008 and with the markets depressed and the Treasuries paying around 2%, it is just a little too depressing to do a full and formal net-worth calculation right now. Maybe I’ll just skip this semi-annual turn and do my next net-worth check in August-08.

I have been day-dreaming about retirement again, however, and running figures through my TVM calculator using last year’s Q1 NW figures. It seems to me that every time I do this I get a little more conservative in my assumptions. What I am now doing is saying that;
Years-in-retirement: to age-100
Present Value (PV): Q1-2007 net-worth
Future Value (FV): 10% of PV
Interest: 2%

My major adjustments this time are the FV figure (I used to run that to 0 by age-100) and the Interest. I am using such a dramatically low interest rate as an inflation adjustment. This way (I figure) what I need to earn over the long-haul is 2% better than the average inflation rate (which is still a pretty conservative position, I think). So, if inflation is running at 2%, I need to earn 4% to hit this target, and if inflation is running at 4% I need to earn a 6% return. This also factors out inflation and normalizes the dollar figures to today’s 2008 values. Of course in 40 years $100k won’t have the same meaning as today, but this adjustment should allow me to project the future value as expressed in 2008-dollars. That’s the theory, anyway.

Even using what I consider to be these extremely conservative assumptions (and with what my wife is currently earning), I could probably just-about afford to retire today, at age 54. So, even if I got laid-off tomorrow, with a little tweaking I probably wouldn’t have to go back to work. Wow, is that an emancipating revelation, or what!

As I project this into the future, then it still looks to me as though it should be “no-brainer easy” to retire at 59, like I have sworn to myself that I will. By “no-brainer easy” I mean that we should actually have more disposable income in retirement (in today’s value) than we have today. Now, I know that expenses are actually likely to rise over time (contrary to popular mythology), so this is probably about right for a comfortable and worry-free retirement.

Anyway, if I had to answer that question; “How confident are you that you can afford retirement?” I’d have to give it a 4.5-out-of 5. And that’s a nice feeling.