MY WIFE AND I are aiming to retire in 10 or 15 years. With the Dow Jones Industrial Average close to 35,000, I can’t help but wonder: At what level for the Dow can we retire?
Yes, I know the Dow is a terrible index. But it’s also the one that’s most commonly mentioned in the media. I’ve followed it for most of my life, so I’m much more emotionally tied to it than the S&P 500 or any other index.
We’re still socking away money for retirement, so our magic Dow number isn’t fixed. On top of that, the Dow companies are throwing off dividends that we’re then reinvesting, which further complicates the math. Currently, the dividend yield on the Dow stocks hovers under 2%, so it may have only a modest impact on our retirement number. Still, if I were gifted at math, I could probably figure it out. But since I’m not, I’m left trying to guess.
If the market were to double, we could certainly hit our goal and retire early. That would put the Dow at 70,000. But what if the Dow industrials were just 50,000 or 60,000? Would that be enough? Depending on how quickly it happens, the answer is likely “yes,” because in the meantime we’ll have saved thousands of dollars more, which will also be growing.
To be sure, these large numbers seem far off. But then again, it wasn’t too long ago that Dow 35,000 seemed unthinkable. When I started investing in 2007, the Dow was close to 14,000—and it went as low as 6,600 during the 2007-09 crash. We’ve come a long way.
I can’t tell you how quickly we’ll get there. But when you see the Dow 50,000 headline, think of me on the beach with a fruity drink. If you happen to walk by, I’ll buy you one, too.