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You’re double counting that $70k. That’s interest on the $1M. Assuming rates stay at 7%, you’d get that $70k every year. You are correct that $70k wouldn’t go a

You’re double counting that $70k. That’s interest on the $1M. Assuming rates stay at 7%, you’d get that $70k every year. You are correct that $70k wouldn’t go as far today due to inflation. But $70k per year was great money in 1996. Related, my dad and a buddy invested $10k in a CD that yielded 21% back in 1984 I think. If the rates are high enough CDs can be an excellent investment. They’re basically risk free. My bank is offering 0.6% currently. Real rates are very negative right now.

sokoloff 5y ago
CD rates barely beat inflation over time. The amount of money that you could remove from the account in a year and leave the principal untouched (in inflation-adjusted terms) is given by the real rate of return. That’s not 7% in the mid-90s (the nominal rate wasn’t even 7%) In order to leave purchasing power untouched, you need to grow the account by the nominal inflation rate and leave that for next year (especially in the context of having “a comfortable living situation then and today” over a near-30-year period.) https://www.putnam.com/literature/pdf/II514-59fb3e978431513e789e3346db7db02a.pdf https://www.putnam.com/literature/pdf/II514-59fb3e978431513e...