5 ms·

> A rational person will say, yeah but if you took your $1000 and invested at a regular rate of return of 10% and waited 50 years I'd have $17,000! How about $

> A rational person will say, yeah but if you took your $1000 and invested at a regular rate of return of 10% and waited 50 years I'd have $17,000! How about $117,000 though

zhdc1 6y ago
Yeah, is the thing that catches people up about compound interest. The original poster's argument (and math) makes sense if they wait 30 years (17K return), which is still a long time. However, waiting another ten years gives them ~40K, and waiting another ten years after that leaves them with ~117K.
- jackhack 6y ago
  meanwhile deliberate inflation is stealing the value of that money over 50 years. For reference, today's dollar has half the purchasing power it had in 1970. So for your example, 50 years of savings = $25,000. That barely covers the cost one year of health insurance for someone 70 years old. And that is all based on the premise of living to age 70.
  - zhdc1 6y ago
    One of the arguments in favor of having sustained, moderate inflation is that it forces people to invest for precisely this reason. Anyway, assuming a 3% inflation rate, the original $1K still turns into $30K after fifty years. It's also worth pointing out that most people in the states qualify for Medicare Part A after they turn 65. Even if they don't, the average monthly health insurance premium for someone who is 70 is around $550. So going off of your example, the original $1K purchases around four-five years of health insurance after inflation. This is a good deal.
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ackbar03 6y ago
Yes, if you'd invested 1000 at 10% over 50 years you'd have 117,000. But let's stick with what OP said. >if _you_ took _your_ $1000 and invested at a regular rate of return of 10% and waited 50 years _I'd_ have $17,000! An excellent return on your investment except your entire life has gone by If we took this at face value, it means the 17k must have been some sort of consulting fee or something. I guess he's saying don't wait 50 years for a 17k consulting fee which you can't really argue with. Either that or OP should check his math
- endisneigh 6y ago
  haha, sorry I actually meant to say 30 years (I had the formula more or less memorized for mortgages which were 30 years, but 20 years more makes a huge difference, as it tursn out!).

> A rational person will say, yeah but if you took your $1000 and invested at a regular rate of return of 10% and waited 50 years I'd have $17,000! How about $117,000 though

zhdc1 6y ago

Yeah, is the thing that catches people up about compound interest. The original poster's argument (and math) makes sense if they wait 30 years (17K return), which is still a long time. However, waiting another ten years gives them ~40K, and waiting another ten years after that leaves them with ~117K.

jackhack 6y ago
meanwhile deliberate inflation is stealing the value of that money over 50 years. For reference, today's dollar has half the purchasing power it had in 1970. So for your example, 50 years of savings = $25,000. That barely covers the cost one year of health insurance for someone 70 years old. And that is all based on the premise of living to age 70.
- zhdc1 6y ago
  One of the arguments in favor of having sustained, moderate inflation is that it forces people to invest for precisely this reason. Anyway, assuming a 3% inflation rate, the original $1K still turns into $30K after fifty years. It's also worth pointing out that most people in the states qualify for Medicare Part A after they turn 65. Even if they don't, the average monthly health insurance premium for someone who is 70 is around $550. So going off of your example, the original $1K purchases around four-five years of health insurance after inflation. This is a good deal.

deleted 6y ago

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ackbar03 6y ago

Yes, if you'd invested 1000 at 10% over 50 years you'd have 117,000. But let's stick with what OP said. >if _you_ took _your_ $1000 and invested at a regular rate of return of 10% and waited 50 years _I'd_ have $17,000! An excellent return on your investment except your entire life has gone by If we took this at face value, it means the 17k must have been some sort of consulting fee or something. I guess he's saying don't wait 50 years for a 17k consulting fee which you can't really argue with. Either that or OP should check his math

endisneigh 6y ago
haha, sorry I actually meant to say 30 years (I had the formula more or less memorized for mortgages which were 30 years, but 20 years more makes a huge difference, as it tursn out!).