Since I started saving, I have had a program—first it was a fortran program, now it is a spreadsheet—calculating how much money I would have each year given projected savings and projected spending amounts. Hopefully this works out in the long term, because 2007-2009 has seen a pretty much stagnant net worth(*) whereas the program projected steady exponential progress.
(*) With the V-bounce, I am 10% richer now than I was in 2007, despite saving furiously in 2007 and 2008.
I use 3% inflation and 8% capital appreciation (about 5% real interest). I think 8% is reasonable as I run a portfolio that is based on partially hedged(*) individual stocks (about 15-20 of them) most of which pays dividends—it is slightly less volatile than an index fund by construction.
(*) I use short ATM options to decrease the beta. It is something you can learn to do comfortably/confidently in about a year of self-study. If you don’t fear corporate bankruptcies or if you like to support the budget deficit or you simply feel traditional, you can do this with bonds too. Synthetically, a long put at the same strike would turn a covered call into a risk-free bond.
According to my model projections, I will be able to buy out DW in 2013.5, at which point I will be good for $360k, which is $180k to back each at a $600/month lifestyle, if she wants to. The reason why this is possible is because I went a “little too far” in my savings goals preferring a “runaway” in my finances. This means that my passive income provides more money than I can practically use and so the rest is reinvested. Ideally, I would like to wait for $400k which would happen in 2014.6 or so, just to preserve the runaway(*). I like positive runaways.
Of course, you could argue that with my part time job (if I still have it at that time), there’s a runaway anyway since I’m not drawing down the portfolio currently, or then. Also, I’m not counting her savings which would move both dates forward. Or a W-shaped “recovery” which would move both dates further out in time.
(*) According to the same projections, I’ll be a USD millionaire in 2024 (age 49), that is, if DW does not retire. At that time, a million bucks will hopefully still buy a lot of beer. I think, maybe, I should start counting my net worth in beers.
Obviously this depends on whether she wants to be a “kept woman” which I think she would not like to be; I certainly would not want to be dependent on my spouse for support(*). If not it would probably take a few more years, but at least the option would be there. Even more obviously, it depends on whether she wants to keep working on regulating the polluters.
(*) It would hurt my fragile male provider ego 😛 . It’s bad enough that I’m no longer the supreme earner even though I’m holding my own. Yes, I know, it’s the 21st century, so I should just get over it.