In January, I posted about how much of investment returns were being taken up to cover the effects of inflation. I fitted a quadratic curve to monthly investment income to smooth it out and compared that to the current inflation rate multiplied by our net worth. It didn't look good. How are things looking now that inflation has come down a bit?
On this graph, I have also added fitted saving and an alternative calculation of expected investment returns. To calculate this one, I fitted a linear trend to the monthly percentage rate of return and multiplied that by net worth. It doesn't include any gain in the value of our house, and turns out to be relatively more conservative. On the other hand, the "boiling point" where investment returns exceeded saving was still around 2012.
The picture has improved in the last few months as inflation has declined. Using the more conservative measure of projected investment income we have a surplus above inflation of around AUD 15k per month, which is in the ballpark of our current spending not counting taxes. If inflation stayed low, retirement should be feasible. But there is still huge uncertainty around future inflation, investment returns, and spending, which continues to make me cautious.
No comments:
Post a Comment