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Ahhhhhhhh... Other than making more money, nothing beats the sweet math that is compound interest. Saving 1M for retirement by 65 is within the reach of many A
by Hasz 7y ago
Ahhhhhhhh... Other than making more money, nothing beats the sweet math that is compound interest.
Saving 1M for retirement by 65 is within the reach of many Americans.
For the worst case scenario, the median wage for a worker with no high school diploma is 30k. Putting away 5k per year in a Roth IRA, every year, until age 65 would leave them with ~1.1M, assuming a 6% (1.1% lower than historical) return. While this is a high savings rate -- ~15%, it is not impossible to hit in most places. This is ignoring catch up contributions, taxes, employer match, Social Security (rip) etc, but it's safe to say this is totally doable in most locales.
Given that the median salary for someone with a college degree is about ~65k, it is well within the grasp of median Americans to save 1M+ for retirement.
However, things like predatory lending, bullshit money gurus, and plain old ignorance stop most Americans from realizing this dream. It's possible, but there is simply no substitute for compounding growth.
- RickJWagner 7y agoYou are so right. Time is the most important factor. Saving a percentage of income, invested for growth, executed over decades is a well-proven scheme. Finanacial education is a rare and precious resource.
- s_Hogg 7y agoI'd add something on to this. The simplest way to build wealth is also by far the most boring. The ones that can handle that boredom are typically the ones that get there in my experience. In my opinion, every financial literacy book/seminar/podcast should be renamed to "Shut up and wait" by law.
- s_Hogg 7y agoIt's also worth pointing out that there are situations where compound interest can definitely beat making more money.