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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), whi
by 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 agomeanwhile 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 agoOne 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.