Despite current interest rates, my portfolio isn't shrinking

[retiredat47]

I do keep track of this kind of thing, and try to stick to a budget (which I'll admit is more than 4% of my portfolio) and yet it has remained stable in the 2-plus years since I decided to do this, albeit not voluntarily.

Whatever it is that I'm doing right, I'm going to keep right on doing it!

[arebelspy]

Not to be too negative, but you may want to start questioning some things.

The market has gone crazy up over the last few years - if yours is just remaining stable, you might not want to consider that a good thing.

Further, if your portfolio is staying stable, that means it has shrunk in real terms, as we haven't had back to back years of 0% inflation.

With results like you've had, you may end up broke at some point...

Just some things to consider.

[retiredat47]

I keep to a budget, and also add up all my accounts quarterly, and the portfolio hasn't shrunk. It just plain old hasn't.

My investments are almost entirely low-risk. I know better than to keep it all in stocks.

[noskich]

So what are you investing in and what is your rate of return?

[Chad]

I keep to a budget, and also add up all my accounts quarterly, and the portfolio hasn't shrunk. It just plain old hasn't.

Arebelspy is suggesting that inflation has devalued your portfolio if the total dollar amount has remained the same.

[arebelspy]

I keep to a budget, and also add up all my accounts quarterly, and the portfolio hasn't shrunk. It just plain old hasn't.

Arebelspy is suggesting that inflation has devalued your portfolio if the total dollar amount has remained the same.

This.

If it hasn't grown, then it's shrinking in real dollars, even if it's the same in nominal dollars.

My investments are almost entirely low-risk. I know better than to keep it all in stocks.

Investing in "low-risk" things in retirement is one of the riskiest things you can do, because inflation will ruin you.

You may be happy your portfolio hasn't shrunk, but if it's not growing, that's not a good thing. Especially when we see inflation and the stock market is shooting up.

In other words, if someone in 1950 had ~52k, that'd be like having ~500k today. And if they retired with that 52k, and after the first few years their portfolio was flat and they were happy about that, they probably didn't realize that their portfolio was worth less due to inflation. Now imagine that the portfolio stayed like that. 50 years later, do you think their expenses will have risen? Heck yes. If they still have that same 52k, should they be happy with that? Gosh, I hope not.

By investing in "low-risk" assets you are risking ending up with very little buying power in the future, even if you have the same amount of money (or even more) as you've ever had.

[workathome]

I just think of inflation as a "wealth tax" without the need to file it or make payments, they just take it right out of the value of your holdings for you!

[arebelspy]

I just think of inflation as a "wealth tax" without the need to file it or make payments, they just take it right out of the value of your holdings for you!

Indeed. And it's even more insidious than that, as with a tax you can see that you have less money. With inflation you could have the same or MORE money than before, yet have that be worth less.

[retiredat47]

I do have part of my 401(k) invested in higher risk things like stocks, and I know from experience that the stock market can collapse at any time. This alone may explain in part why my portfolio hasn't shrunk.

[DutchGirl]

Can you analyze with what money you have financed your life over these last two years? You probably have gotten some returns from stock growth, AND from bonds, AND from dividend (from the stocks and the bonds). Can you tell us which percentage of your expenses was financed with what part of the growth?

I'm also curious because one day, hopefully not too far in the future, I'll have to also tap into my assets. Currently if any money comes out of my investments, everything gets reinvested for me...

[retiredat47]

So what are you investing in and what is your rate of return?

The rate varies widely. I have a 401(k) from my old job, CDs, savings bonds, and an annuity at an insurance company. Most of the CDs are 5-year, and I cash in some of them and roll others over, depending on whether I need the money now.

I just wish I'd purchased savings bonds in the late 1990s, because some of those are currently earning 7% or higher!

[workathome]

I doubt your savings bonds or CDs are beating inflation. With those you're basically essentially spending them down, not actually living off the returns.

[JamesR]

retiredat47,

At your current rate, your portfolio may not last for more than 20-25 years. Withdrawing at a 4% budget is possibly too high for such low-return, risk-averse investing.