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> but people working average mid-life jobs at average salaries who consistently save $100/month or more can amass significant retirement wealth over 30-40 years
by koolba 2y ago
> but people working average mid-life jobs at average salaries who consistently save $100/month or more can amass significant retirement wealth over 30-40 years.
You’re off by at least a factor of ten.
40 years of $100/month savings at a generous 5% compounding is $148,242. And that’s in future dollars. Drop it to 4% and you’re down $116,606.
The real formula to consider is what percentage of your monthly spending you are savings. If it’s 100%, then every month worked is one month of retirement. If it’s 50% then two months of working is one month of retirement. If you live frugally and save 400% of your spend, each month counts as four retired months.
It’s a simple fraction with the numerator as your net savings and the denominator your total spending. And lowering the denominator scales things much faster.
- deleted 2y ago[deleted]
- WorkerBee28474 2y ago5% is not generous. 5% is conservative. 10% is historical for the S&P 500. 12% is generous.
- scoofy 2y ago7% is historical for S&P500, but that's with 3% average inflation. His point is that 5% real returns are, in fact, generous.
- whamlastxmas 2y agoEspecially generous if you account for official inflation numbers doing a terrible job at representing income to cost of living ratio
- NoLinkToMe 2y agoNo he said 5% 'is in future dollars', i.e. not inflation adjusted to a present value... When in reality the nominal S&P500 returns are 10% leading to the same 'future dollars'. That is conservative. Plus if 7% real returns (after a 3% inflation) is the historical average, how is 5% real returns generous? That's still conservative even if he meant to claim a 5% real return.