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Am I reading that right? S&P500 nets you on average a 10% annual return of investment? Does that mean you can "just" invest ten times your yearly living expense

by Asooka 9y ago

Am I reading that right? S&P500 nets you on average a 10% annual return of investment? Does that mean you can "just" invest ten times your yearly living expenses and practically live off idle income? How does that not completely destroy the economy and why isn't everyone doing it?

nabla9 9y ago
Pension funds are large investors, so part of peoples savings are there. In general people don't save that much. Not even enough to retire comfortably. Many people prefer own houses instead. Total market cap of SP500 is ~$20 trillion. Divided between US adults that is something like $80 thousand per adult.
pg314 9y ago
> S&P500 nets you on average a 10% annual return of investment? In the last 10 years, yes. Historically, it's been closer to 7% in real terms (adjusting for inflation). There are no guarantees that this will be the case for the future. > Does that mean you can "just" invest ten times your yearly living expenses and practically live off idle income? You'll need more than that because there are multi-year periods where the s&p 500 declines. The number that has been bandied around for a 'safe' withdrawal rate is 4% [1], so you'll need closer to 25 times your yearly living expenses. > How does that not completely destroy the economy and Because not everybody is doing it. If they were you wouldn't be getting those returns, obviously. > why isn't everyone doing it? Most Americans have less than $1000 in savings, let alone 10x their yearly living expenses. [1] http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/ http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need...
ng12 9y ago
Because 70% Americans have less than $1,000 in their savings account, let alone taxable brokerage accounts [1]. Living off cap gains is not even on most people's radar. If you're really interested there's a pretty interesting Reddit community based around saving for that goal [2]. 1. https://www.cnbc.com/2017/06/13/heres-how-many-americans-have-nothing-at-all-saved-for-retirement.html https://www.cnbc.com/2017/06/13/heres-how-many-americans-hav... 2. https://www.reddit.com/r/financialindependence https://www.reddit.com/r/financialindependence

by Asooka 9y ago

nabla9 9y ago

Pension funds are large investors, so part of peoples savings are there. In general people don't save that much. Not even enough to retire comfortably. Many people prefer own houses instead. Total market cap of SP500 is ~$20 trillion. Divided between US adults that is something like $80 thousand per adult.

pg314 9y ago

> S&P500 nets you on average a 10% annual return of investment? In the last 10 years, yes. Historically, it's been closer to 7% in real terms (adjusting for inflation). There are no guarantees that this will be the case for the future. > Does that mean you can "just" invest ten times your yearly living expenses and practically live off idle income? You'll need more than that because there are multi-year periods where the s&p 500 declines. The number that has been bandied around for a 'safe' withdrawal rate is 4% [1], so you'll need closer to 25 times your yearly living expenses. > How does that not completely destroy the economy and Because not everybody is doing it. If they were you wouldn't be getting those returns, obviously. > why isn't everyone doing it? Most Americans have less than $1000 in savings, let alone 10x their yearly living expenses. [1] http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/ http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need...

ng12 9y ago

Because 70% Americans have less than $1,000 in their savings account, let alone taxable brokerage accounts [1]. Living off cap gains is not even on most people's radar. If you're really interested there's a pretty interesting Reddit community based around saving for that goal [2]. 1. https://www.cnbc.com/2017/06/13/heres-how-many-americans-have-nothing-at-all-saved-for-retirement.html https://www.cnbc.com/2017/06/13/heres-how-many-americans-hav... 2. https://www.reddit.com/r/financialindependence https://www.reddit.com/r/financialindependence