Investors who have remained "all in" the Standard and Poor's 500 Index for the last five years from October 2007 to October 2012 are still down 1.19% per year in real terms, with dividends fully reinvested.
If you've been taking your dividends, say as a retiree, you are down 3.35% per year.
This is pretty grim news when you consider that one school of thought for a conservative retirement drawdown from a portfolio is $40,000 a year, a 4% rate on a $1 million.
If you have been "all in" the SP500 with that sum, which you probably shouldn't be but let's say you are, it is throwing off just about $21,000 in dividend income right now (a little over 2%), so you've got to make up the difference from capital which over the last five years is already posting a 3.35% loss per year. So on top of that 3.35% loss you are taking another 2% per year from the seed corn to make up the difference, meaning your drawdown rate has been really more like 5.35% per annum.
This means that over the last five years such a $1 million retirement portfolio has been plundered by market vicissitudes and the retiree's human necessity by about $268,000. Nothing lasts forever, especially at that rate.
Chart and data here.
