5 ms·

Just goes to show the effect of putting away money every year, and placing it in assets where the returns will compound over a long period.

by ghazak 8y ago

loeg 8y ago
Especially over a 67 year period! If she saved about $10k (2018 dollars) annually for the first ten years of her working career, got ~4% after inflation, and never saved another penny that would account for ~$1.2 million of the sum by itself. Buy and hold long term; reinvest dividends folks :-).
- djrobstep 8y ago
  What if I'm hit by a bus and killed the day before I retire?
  - loeg 8y ago
    That is a fairly unlikely outcome. Consult an actuarial table. If it happens, it happens. Not saving for retirement because you might die suddenly is irrational and defies statistics on when and how people die.
  - CydeWeys 8y ago
    Not sure what your point is here -- A chance of reaching the future means you shouldn't plan for the future at all, even though statistically most people do survive to retirement age?
    - brisance 8y ago
      No, grandparent is saying "carpe diem". You never know when you're going to drop dead, and being too old makes it difficult to see the world. Also, you never know when evil politicians are going to raid Social Security or change the laws to protect insurance companies that have taken on moral hazards, causing you to lose your coverage/annuity.
    - lifeformed 8y ago
      The point, in my interpretation, is: don't put all your eggs in the basket of your latter years. Find the balance of long term planning and short term fulfillment.
      - CydeWeys 8y ago
        Nobody's suggesting doing such though (yet the comment seemed to imply someone had). The suggestion was to save a meager $10K/year, which is tiny relative to the salaries of most people on here.
        sidlls 8y ago
        It's 20% of the gross median household income. For the typical family it's probably closer to 25%-30% or more of their gross pay net of taxes. That's a lot of money to save for this kind of household. It's simply not a realistic goal for the majority of households in America.
    - hfdgiutdryg 8y ago
      I think the implication is that if your spend your life toiling for future reward at the expense of present reward, you may lay there on the pavement bleeding out, wishing that you'd taken that vacation you always wanted. Obviously it's presuming that you're neglecting reasonable gratification in the present, and it's all a spectrum of choices and rewards. But often people talk about financial investment without balancing it with "personal investment". Personal enrichment can pay interest of a sort, too.
      - loeg 8y ago
        I think you're maybe being too charitable with djrobstep's comment. It's an inane response to the comment it replies to. Here's the full context: > > Especially over a 67 year period! If she saved about $10k (2018 dollars) annually for the first ten years of her working career, got ~4% after inflation, and never saved another penny that would account for ~$1.2 million of the sum by itself. > > Buy and hold long term; reinvest dividends folks :-). > What if I'm hit by a bus and killed the day before I retire? It's just not responsive to the original comment and doesn't really bring up anything novel. It might be slightly more reasonable if included your elaborations, but it doesn't, and even then it's totally silly. Saving $10k/yr is not a hardship for most tech workers and does not preclude gratification in the present! $90-100k annually is still several standard deviations above median income.
        lordCarbonFiber 8y ago
        What you, and most people championing the virtues of the slow and steady save, fail to consider is the time value of money (ie why those investments compound so much interest). Money today is worth more than money tomorrow is worth a truck load more than money in 67 years. Combined with the fact that, at least in my opinion, money when I'm young and healthy is also worth multiplicatively more than money post retirement. I think most young people would rather be, and far better off with, saving that 10k annually you suggest to amassing a down payment on city property or equivalent investment in current quality of life rather than prepping for a lonely future.
        8y ago
  - ThrowawayR2 8y ago
    > What if I'm hit by a bus and killed the day before I retire? Isn't that question backwards? What we should be asking is: What are we going to do if we _aren't_ hit by a bus and killed the day before we retire?
  - post_break 8y ago
    You're getting down voted but it's true. My mom was a few years away from retirement. Was cutting trees in the back yard and had a pain in her shoulder. Cancer in her lung. She died 8 months later. My dad and her were about to retire and just travel the world. Now I call my dad every other day because he is slowly starting to lose it.
    - kalleboo 8y ago
      Same thing for my grandparents. Saved and made grand plans for travel. Then grandpa got lung cancer and grandma got to travel solo instead... I'm getting my ya-yas out in my youth.
  - eeZah7Ux 8y ago
    This is, quite literally, an example of survivor bias. Some people might be able to amass a fortune by the time they are 96 unless you die before / your index funds & co tank / you, or somebody close, need expensive treatments.
  - Cthulhu_ 8y ago
    That's the crooked part about the US retirement system, as far as I could gather it. On my side of the pond, your employer deposits an X amount per month / paycheck into your retirement fund. That fund will play with it, invest it to get interest and make sure it keeps its value over time despite inflation. When you quit your job, that retirement fund will continue to manage your money. When you get a new job, either the fund continues or it's done in another pension fund - you are given the option to either have what's in the old fund paid out, or transferred to your new one. When you are fired before your retirement, no worries - the retirement fund is yours, not your employer's. And TBF everyone should fight for that. There's nobody that will hire anyone until they retire anymore. US employment laws are too lax to enforce that. And if your retirement is directly linked to you having a job at age 65 or whatever the age is, you'll get fucked over one way or another.
    - mercutio2 8y ago
      I can’t tell what part of that you think is different in the US. The US has three major retirement regimes: - Defined contribution retirement funds, owned by the employee, managed by employer designated group - Defined benefit retirement funds, which are going away or nearly gone for non-public-employees, and are causing the bankruptcy of various states because governments thought it was clever to offer public employees most of their compensation in the distant future to deceive present taxpayers about the cost of government - An income distributing safety net for the elderly which is dressed up to pretend it’s a retirement program Doesn’t sound so different from most European systems I’m familiar with, except for the much better health care (which dominates costs in old age, of course)
- ReallyAnonymous 8y ago
  my parents have always been frugal and wise with their money. My dad lost his job at age 51 and couldn't find another job so he retired. His last salary, in 1981, was 30K a year. But he's good at the stock market. My mom says they've never touched the principal. In addition, tax laws are written to benefit those who earn without working. The first $75k in qualified dividends is tax free. In 2017 he grossed about $120k, $80k in qualified dividends. With deductions, etc... his federal tax bill was $2k. And no social security. With their expenses about $50k, it compounds rather quickly. He's now 86.
  - vladsanchez 8y ago
    I must talk to your dad... Please!
- jiveturkey 8y ago
  4% after inflation is not easy
  - dannyw 8y ago
    A S&P 500 index fund will get you that.
    - ghazak 8y ago
      At fees of 4/100ths of a percent. Vanguard has created a simply enormous consumer surplus. Thank you Bogle.
    - adrianN 8y ago
      Starting in what year?
      - dannyw 8y ago
        Starting in any >25 year period since 1903, I think.
        adrianN 8y ago
        I looked it up. There are long periods where it performed just above inflation. http://archive.nytimes.com/www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html?ref=business http://archive.nytimes.com/www.nytimes.com/interactive/2011/...
        loeg 8y ago
        Nope. That graph is incredibly misleading. Note that the middle color represents 3-7% inflation-adjusted returns after "fees and taxes" (how are those calculated?) and the light red color represents 0-3% inflation-adjusted returns (again after fees and taxes). 6.2% is the claimed average inflation-adjusted return. A lump sum invested for 67 years at 6.2% is something like a 5500% return on initial investment. Very few start dates yield poor returns over a 20-year period, and fewer over a 25+ year period. Much less 67 years. I'm also not sure about the methodology of "including fees and taxes," since the average mutual fund fee has been very high until quite recently, despite Vanguard's start in the 70s, and taxes are highly individual. The article is light on details.
intrasight 8y ago
Indeed. You can play out scenarios yourself using this investment calculator app that I built for a client recently. It does ask for contact info before launching, but from what I can tell, they never contact you. https://simulators.gibsoncapital.com/total-simulator/ https://simulators.gibsoncapital.com/total-simulator/
- betterworldb 8y ago
  There's this awesome free tool from Dave Ramsey as well that's good and doesn't take your contact info https://www.daveramsey.com/smartvestor/investment-calculator https://www.daveramsey.com/smartvestor/investment-calculator
marnett 8y ago
and the irony that no modern day receptionist would have a job long enough to benefit from the exact system that made it possible in this one case.

Just goes to show the effect of putting away money every year, and placing it in assets where the returns will compound over a long period.

by ghazak 8y ago

Just goes to show the effect of putting away money every year, and placing it in assets where the returns will compound over a long period.

loeg 8y ago

Especially over a 67 year period! If she saved about $10k (2018 dollars) annually for the first ten years of her working career, got ~4% after inflation, and never saved another penny that would account for ~$1.2 million of the sum by itself. Buy and hold long term; reinvest dividends folks :-).

djrobstep 8y ago
What if I'm hit by a bus and killed the day before I retire?
- loeg 8y ago
  That is a fairly unlikely outcome. Consult an actuarial table. If it happens, it happens. Not saving for retirement because you might die suddenly is irrational and defies statistics on when and how people die.
- CydeWeys 8y ago
  Not sure what your point is here -- A chance of reaching the future means you shouldn't plan for the future at all, even though statistically most people do survive to retirement age?
  - brisance 8y ago
    No, grandparent is saying "carpe diem". You never know when you're going to drop dead, and being too old makes it difficult to see the world. Also, you never know when evil politicians are going to raid Social Security or change the laws to protect insurance companies that have taken on moral hazards, causing you to lose your coverage/annuity.
  - lifeformed 8y ago
    The point, in my interpretation, is: don't put all your eggs in the basket of your latter years. Find the balance of long term planning and short term fulfillment.
    - CydeWeys 8y ago
      Nobody's suggesting doing such though (yet the comment seemed to imply someone had). The suggestion was to save a meager $10K/year, which is tiny relative to the salaries of most people on here.
      - sidlls 8y ago
        It's 20% of the gross median household income. For the typical family it's probably closer to 25%-30% or more of their gross pay net of taxes. That's a lot of money to save for this kind of household. It's simply not a realistic goal for the majority of households in America.
  - hfdgiutdryg 8y ago
    I think the implication is that if your spend your life toiling for future reward at the expense of present reward, you may lay there on the pavement bleeding out, wishing that you'd taken that vacation you always wanted. Obviously it's presuming that you're neglecting reasonable gratification in the present, and it's all a spectrum of choices and rewards. But often people talk about financial investment without balancing it with "personal investment". Personal enrichment can pay interest of a sort, too.
    - loeg 8y ago
      I think you're maybe being too charitable with djrobstep's comment. It's an inane response to the comment it replies to. Here's the full context: > > Especially over a 67 year period! If she saved about $10k (2018 dollars) annually for the first ten years of her working career, got ~4% after inflation, and never saved another penny that would account for ~$1.2 million of the sum by itself. > > Buy and hold long term; reinvest dividends folks :-). > What if I'm hit by a bus and killed the day before I retire? It's just not responsive to the original comment and doesn't really bring up anything novel. It might be slightly more reasonable if included your elaborations, but it doesn't, and even then it's totally silly. Saving $10k/yr is not a hardship for most tech workers and does not preclude gratification in the present! $90-100k annually is still several standard deviations above median income.
      - lordCarbonFiber 8y ago
        What you, and most people championing the virtues of the slow and steady save, fail to consider is the time value of money (ie why those investments compound so much interest). Money today is worth more than money tomorrow is worth a truck load more than money in 67 years. Combined with the fact that, at least in my opinion, money when I'm young and healthy is also worth multiplicatively more than money post retirement. I think most young people would rather be, and far better off with, saving that 10k annually you suggest to amassing a down payment on city property or equivalent investment in current quality of life rather than prepping for a lonely future.
        8y ago
- ThrowawayR2 8y ago
  > What if I'm hit by a bus and killed the day before I retire? Isn't that question backwards? What we should be asking is: What are we going to do if we _aren't_ hit by a bus and killed the day before we retire?
- post_break 8y ago
  You're getting down voted but it's true. My mom was a few years away from retirement. Was cutting trees in the back yard and had a pain in her shoulder. Cancer in her lung. She died 8 months later. My dad and her were about to retire and just travel the world. Now I call my dad every other day because he is slowly starting to lose it.
  - kalleboo 8y ago
    Same thing for my grandparents. Saved and made grand plans for travel. Then grandpa got lung cancer and grandma got to travel solo instead... I'm getting my ya-yas out in my youth.
- eeZah7Ux 8y ago
  This is, quite literally, an example of survivor bias. Some people might be able to amass a fortune by the time they are 96 unless you die before / your index funds & co tank / you, or somebody close, need expensive treatments.
- Cthulhu_ 8y ago
  That's the crooked part about the US retirement system, as far as I could gather it. On my side of the pond, your employer deposits an X amount per month / paycheck into your retirement fund. That fund will play with it, invest it to get interest and make sure it keeps its value over time despite inflation. When you quit your job, that retirement fund will continue to manage your money. When you get a new job, either the fund continues or it's done in another pension fund - you are given the option to either have what's in the old fund paid out, or transferred to your new one. When you are fired before your retirement, no worries - the retirement fund is yours, not your employer's. And TBF everyone should fight for that. There's nobody that will hire anyone until they retire anymore. US employment laws are too lax to enforce that. And if your retirement is directly linked to you having a job at age 65 or whatever the age is, you'll get fucked over one way or another.
  - mercutio2 8y ago
    I can’t tell what part of that you think is different in the US. The US has three major retirement regimes: - Defined contribution retirement funds, owned by the employee, managed by employer designated group - Defined benefit retirement funds, which are going away or nearly gone for non-public-employees, and are causing the bankruptcy of various states because governments thought it was clever to offer public employees most of their compensation in the distant future to deceive present taxpayers about the cost of government - An income distributing safety net for the elderly which is dressed up to pretend it’s a retirement program Doesn’t sound so different from most European systems I’m familiar with, except for the much better health care (which dominates costs in old age, of course)
ReallyAnonymous 8y ago
my parents have always been frugal and wise with their money. My dad lost his job at age 51 and couldn't find another job so he retired. His last salary, in 1981, was 30K a year. But he's good at the stock market. My mom says they've never touched the principal. In addition, tax laws are written to benefit those who earn without working. The first $75k in qualified dividends is tax free. In 2017 he grossed about $120k, $80k in qualified dividends. With deductions, etc... his federal tax bill was $2k. And no social security. With their expenses about $50k, it compounds rather quickly. He's now 86.
- vladsanchez 8y ago
  I must talk to your dad... Please!
jiveturkey 8y ago
4% after inflation is not easy
- dannyw 8y ago
  A S&P 500 index fund will get you that.
  - ghazak 8y ago
    At fees of 4/100ths of a percent. Vanguard has created a simply enormous consumer surplus. Thank you Bogle.
  - adrianN 8y ago
    Starting in what year?
    - dannyw 8y ago
      Starting in any >25 year period since 1903, I think.
      - adrianN 8y ago
        I looked it up. There are long periods where it performed just above inflation. http://archive.nytimes.com/www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html?ref=business http://archive.nytimes.com/www.nytimes.com/interactive/2011/...
        loeg 8y ago
        Nope. That graph is incredibly misleading. Note that the middle color represents 3-7% inflation-adjusted returns after "fees and taxes" (how are those calculated?) and the light red color represents 0-3% inflation-adjusted returns (again after fees and taxes). 6.2% is the claimed average inflation-adjusted return. A lump sum invested for 67 years at 6.2% is something like a 5500% return on initial investment. Very few start dates yield poor returns over a 20-year period, and fewer over a 25+ year period. Much less 67 years. I'm also not sure about the methodology of "including fees and taxes," since the average mutual fund fee has been very high until quite recently, despite Vanguard's start in the 70s, and taxes are highly individual. The article is light on details.

intrasight 8y ago

Indeed. You can play out scenarios yourself using this investment calculator app that I built for a client recently. It does ask for contact info before launching, but from what I can tell, they never contact you. https://simulators.gibsoncapital.com/total-simulator/ https://simulators.gibsoncapital.com/total-simulator/

betterworldb 8y ago
There's this awesome free tool from Dave Ramsey as well that's good and doesn't take your contact info https://www.daveramsey.com/smartvestor/investment-calculator https://www.daveramsey.com/smartvestor/investment-calculator

marnett 8y ago

and the irony that no modern day receptionist would have a job long enough to benefit from the exact system that made it possible in this one case.