4 ms·
Saving $5000 per year for 75 years compounded annually at 6.2% would net you a little over $8M. An unremarkable return on an unremarkable savings rate.
by Andre_Wanglin 8y ago
Saving $5000 per year for 75 years compounded annually at 6.2% would net you a little over $8M. An unremarkable return on an unremarkable savings rate.
- hunter23 8y agoYou are neglecting inflation. There was no way this secretary was saving $5000 a year 75 years ago - her yearly salary was mostly likely around that amount.
- loeg 8y agoThe 6.2% return on investment is after subtracting inflation. Think of the $5k in 2018 dollars.
- Andre_Wanglin 8y agoI didn't need to consider inflation to make my point.
- davidgay 8y agoI don't think a 21year old secretary was saving the equivalent of $70k 2018 dollars in 1943.
- loeg 8y agoThe $5k figure is in 2018 dollars and the rate of return is inflation-adjusted.
- pliny 8y agoThat's not true, you only get to that figure with 5,000 nominal dollars and 6.2% unadjusted interest >>> def comp(s, n, i): ... m = 0 ... for x in range(n): ... m *= i ... m += s ... return m ... >>> comp(5000, 77, 1.062) 8201943.704759633 So there were some abnormal returns (or inheritance) involved.
- loeg 8y agoI think your program confirms rather than disputes my comment.
- pliny 8y agoMy program adds 5000 nominal dollars to a savings account every 'year' and then applies a 6.2% interest rate once a 'year'. Where is the '2018 dollars'? The account takes the same nominal deposit at year 0 as at year 76. Where is the adjustment for inflation in the interest rate? The account adds 6.2% every year regardless of that years inflation. EDIT: The program obviously cannot account for inflation since it has no notion of inflation. If the secretary were depositing 5000 '2018 dollars' in 1947, then the nominal deposit would have to be something like $500. Inflation is usually positive, so money in the past is worth more.
- ascorbic 8y ago6.2% is the average, inflation-adjusted rate.
- xorfish 8y agohttps://dqydj.com/sp-500-return-calculator/ https://dqydj.com/sp-500-return-calculator/ Average dividend reinvested and inflation adjusted return between 1949 and 2016 is 7.5% >>> def comp(A, n, i): ... m = 0 ... for x in range(n): ... m += i**x ... return A/m ... >>> comp(9000000, 67, 1.0725) 6053.012676780852 Assuming costs of 0.25%, she needs to invest a little over 6000 2016 USD per year to get 9 million USD.
- garmaine 8y agoWho said anything about $70k?
- Mtinie 8y agoAndre_Wanglin alluded to it, though $70k was a slight overstatement. With the effective inflation rate, $5,000 in 1947 was equivalent to $58,035 in 2018. https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=5000&year1=194701&year2=201803 https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=5000&year1=194...
- Retric 8y agoHe was using 5k inflation adjusted dollars so starting with ~350 actual $/ year in 1947. Really, just do the calculation.
- newnewpdro 8y agoParent is stating $5k in 1943 dollars is $70k in 2018 dollars (a claim I did not verify).
- garmaine 8y ago6.2% would be inflation adjusted returns. Actual inflation adjusted returns were 7.4%. So investing the equivalent of $5k each year from then until now (so starting at $350 or whatever) would yield >$8.2M.
- Andre_Wanglin 8y agoIt's an example. I bet she was saving way more than $5000 for most of that time.
- CamelCaseName 8y agoAll it takes is one remarkable variable -- age. The same values taken for a 50 year period are only $1.65MM, nothing to sneeze at, but a far cry from $8.2MM.