3 ms·
And if they're making a 7% rate of return for 27 years, how's the person who already had $10 million in wealth and earning 7% per year ($700k per year in wealth
by ACow_Adonis 7y ago
And if they're making a 7% rate of return for 27 years, how's the person who already had $10 million in wealth and earning 7% per year ($700k per year in wealth appreciation alone from year 1) changing during those 27 years?
- vonmoltke 7y agoI take it you are assuming wealth appreciation in a way that doesn't create income, or at least isn't predominantly treated as income?
- ummonk 7y agoInvestments are usually taxed at long term capital gains rates and only when you realize them. So someone with 500k income can be putting away 250k a year into investments, while someone with a 10 million dollar portfolio can be having 700k in gains each year, only getting taxed when they sell something.
- vonmoltke 7y agoThat was my point. You are assuming the wealth appreciation is mostly asset value appreciation that is not realized as a gain every year. Otherwise, this household would also be in the top 1% of incomes, and this thread started by talking about the distinction between top 1% incomes and top 1% wealth.
- ACow_Adonis 7y agoHonestly, I'd assume both income and wealth are part of an abstract concept I'd call, in this instance, 'capital'. The specific ways both are taxed or regulated depend too much on individual circumstances and governments, but the main point is you can't use a simple model that shows a 'well-off' income earner can make it into the top n% in 27 years, if the assumptions required to get that to work also gives the n% a greater or equivalent benefit.