Re: My daughter is a millionaire
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Check your math. The Vanguard Balanced annuity (60-70% equity, remainder fixed income) has been around since 1991 and has returned 10.5% net of fees; inflation in the US has been historically 3%. In 65 years, this 7.5% real return compounds to 110x the original contribution, or $1M+
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Yes, the return has been entirely too aggressive. Note that in those 15 years the bond portion has benefited from declining interest rates. In 1991 the 30 year treasury was 8.14%, last year it was 4.91%. That caused a huge increase in the value of carried bonds, and you can't count on similar declines in the future. In fact, an increase in interest rates will almost guarantees the bond portion of your investment will do very poorly.
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Think the return is too aggressive because the last 20 years have been atypical? No matter, I'm planning to make $10k contributions annually for the indefinite future. An additional $10k (contributed early) lets me hit the same $1M+ nut with a 1% lower rate of return.
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Like I said, you'll have to, because you won't come close to 10.5%. Long term equity returns have been roughly 10%, and there are those who argue given the higher PE ratio of todays market (than is typical historically) implies equity returns of 8-9% going forward.
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