2 ms·

Note that from December 1999 to December 2009, the average annual compounded rate of return for the S&P 500 was -0.6%, and the average annual inflation rate in

by spokey 16y ago

Note that from December 1999 to December 2009, the average annual compounded rate of return for the S&P 500 was -0.6%, and the average annual inflation rate in that same period is around 2.8%. A 5% return over inflation may be a little optimistic. Also, "in the bank" has now become "net worth" and our family with a 3 BR condo has now become a couple with a 2 BR that has what, doubled their investment on the condo bought in 1997? I'm not sure that's a typical case. Even at the height of the housing bubble I think that represents a fairly exceptional return, e.g.: http://en.wikipedia.org/wiki/File:USA_home_appreciation_1998_2006.svg http://en.wikipedia.org/wiki/File:USA_home_appreciation_1998... But you don't need to convince me. I agree with you: I'm 100% confident that there are many reasonable scenarios that lead to well over $500,000 in net worth by 39. I'm just pushing back on the "easy" part: If this were easy more people would be doing that, but that fact is $0.5M is 10 times the net worth of the average American in the cohort we're talking about, and more than twice the net worth of the average American at the time of retirement. By living frugally and choosing investments wisely you can certainly do it, but those are easier choices to make in retrospect than working forward. (Edit: I said $500,000 is 100 times the net worth of the typical American 40 year old, but it is really just 10 times.)

Retric 16y ago
Edit: What you say is reasonable, while I understand your viewpoint I want to add a little food for thought. First off, 401k contributions to the S&P 500 over that time period would significantly outperform that due to Dollar cost averaging. http://en.wikipedia.org/wiki/Dollar_cost_averaging http://en.wikipedia.org/wiki/Dollar_cost_averaging. Even more so if you assume that they made smaller payments early on when they were making less money. Also, for clarification I am assuming they leverage the roommate to rapidly pay down the mortgage, I know people in that situation making less than 65k that pay down an extra 600$-1000$ a month while trying to get out from PMI. EX: A 26 year old making ~52k decided to refinance to a 15 year mortgage when the rates dropped because he was paying significantly more than that anyway and with the new interest rate and he could pay it down even faster. As to easy: In 2007, the "real" (adjusted for inflation) median annual household income rose 1.3% to $50,233.00. 10x the savings from 1.8x the average household income sounds works when the average savings rate is so low. There are rules of thumb that you pay X% of your income on specific category’s, but we are well into the ridicules stage so saving ridicules amounts of money is just as valid as having stupid bar tabs. PS: I happened to put a fair amount into the stock market during the dip last year at the same time as my company’s annual 10% deposit so my 401k actually made over 40% ROI last year. Starting in 2002 I have made well over 5% plus inflation and I missed the dip right after the 2000 – 2001 crash.

by spokey 16y ago

Retric 16y ago

Edit: What you say is reasonable, while I understand your viewpoint I want to add a little food for thought. First off, 401k contributions to the S&P 500 over that time period would significantly outperform that due to Dollar cost averaging. http://en.wikipedia.org/wiki/Dollar_cost_averaging http://en.wikipedia.org/wiki/Dollar_cost_averaging. Even more so if you assume that they made smaller payments early on when they were making less money. Also, for clarification I am assuming they leverage the roommate to rapidly pay down the mortgage, I know people in that situation making less than 65k that pay down an extra 600$-1000$ a month while trying to get out from PMI. EX: A 26 year old making ~52k decided to refinance to a 15 year mortgage when the rates dropped because he was paying significantly more than that anyway and with the new interest rate and he could pay it down even faster. As to easy: In 2007, the "real" (adjusted for inflation) median annual household income rose 1.3% to $50,233.00. 10x the savings from 1.8x the average household income sounds works when the average savings rate is so low. There are rules of thumb that you pay X% of your income on specific category’s, but we are well into the ridicules stage so saving ridicules amounts of money is just as valid as having stupid bar tabs. PS: I happened to put a fair amount into the stock market during the dip last year at the same time as my company’s annual 10% deposit so my 401k actually made over 40% ROI last year. Starting in 2002 I have made well over 5% plus inflation and I missed the dip right after the 2000 – 2001 crash.