I am a grad student earning my degree in family financial planning. In a current course, an article featuring your assertion on 100% bond portfolio was presented and argued. During the interview, you offered a reconsideration of the common presumption that is an investor would likely retire at 65 and that rule-of-thumb savings is 10% of income. You advised one to consider a later retirement and 20% savings as a means to prudent retirement savings goal. With respect to the 20% savings, some took exception — thought of this as unreasonable, thus unlikely and a flawed argument. I disagree. But then again, I appreciate the art of ‘frugal’, so I can easily fathom a 20% or better savings plan. Can you elaborate on why you feel 20% (vs. 10%) savings is reasonable, without increasing income?
The right approach to saving for retirement is to do a careful analysis based on your own circumstances. Do not rely on rules of thumb. My colleague, Larry Kotlikoff, calls these “rules of dumb,” and I agree with him. Take a look at his planning software for free at eslpanner.com.
The thrust of my article was to say that you should not assume a high rate of return on investments in doing your planning. You should start with a baseline plan that is as safe as possible. You do this by investing in inflation-proof TIPS. Currently they are returning a real rate of return of between 1% to 2% per year, depending on maturity. You can check current interest rates on my Market Indicators page. For most people this results in a higher required saving rate than when you assume higher rates of return.