Craig and Mary are 27 years old and are just starting their 401(k) with different law firms. They have a combined income of $150,000 and plan on saving a combined $32,000 per year in 401(k) and 457 plans. The do not plan on children, but like to travel. They bought two new cars and just moved into a 4 bedroom 4500 square foot new home, having paid $925,000 for it. One car is a red Mercedes and the other a blue Audi Quatro. They feel that they will need $3,500,000 in today’s dollars to retire at 65. Inflation is running at 2.1%. There are no pensions and they have already calculated social security at $39,000 in today’s dollars, which they don’t think they will receive anyway. They are earning 7.2% on their investments.
What return do they need and what portfolio should they use prior to and post retirement?
Post retirement is 100 years old.