Will you calculate to a real “pay” increase from your portfolio for 2025?
Posted on September 20, 2024

Wow. I am shocked and pleased. I may be able to calculate to a real increase in my Safe Spending Amount (SSA, Chapter 2, Nest Egg Care) at the end of November! I would have thought this was impossible last year at this time. I previously calculated that I needed to earn 18.7% real return on my portfolio for my 12-month period ending November 30. My return for 9+ months is now 19.0%. That’s about triple the expected return rate on my portfolio.

If your portfolio mix is like mine (85% stocks) you also are on track to calculate to a real increase in your SSA. You may not be able to if you have a greater mix of bonds: stocks have rebounded big time from their nose dive in 2022; bonds nosedived more than stocks in 2022, and haven’t recovered nearly as much.

Details:

I previously calculated that I had to earn 18.7% real portfolio return for the 12 months ending November 30 to be able to get to an amount that would result in a real increase in my Safe Spending Amount for 2025.

I track my real portfolio return monthly, but after yesterday’s sharp increase, I could not resist seeing where I stand. My real portfolio return for year-to-date for the 12 months ending November 30 is 19.0%.

I could use that portfolio return as a peak value and calculate a new SSA for the upcoming spending year – 2025. That calculates to less than 0.3% real increase, but at least it’s an increase. I’ll just wait nine more weeks to the end of November for the final calculation to see how it all shakes out then.

Conclusion: We all took a big hit to our portfolios in 2022. It was the third worst annual return for US stocks in my lifetime, and it was the worst annual return for bonds in history. We have bounced back BIG TIME since the nadir in October 2022. US stocks, in particular, have rebounded and, inflation-adjusted, are well above their prior peak.

I would have thought it would be years before I would be able to calculate to a real increase in my Safe Spending Amount. But the returns in 2023 and so far for 2024 – 19.0% real return – track to a real increase that I’ll calculate this November 30. You are on the same track if your mix of stocks and bonds is similar to mine.