6 ms·

Unless my little spreadsheet here is wrong, if we assume you can invest at 3% above inflation, saving 50k per year will get you a million dollars in 16 years.

Unless my little spreadsheet here is wrong, if we assume you can invest at 3% above inflation, saving 50k per year will get you a million dollars in 16 years. The second million only takes ten more years. Nine years after that, at year 35, you get your third million, at which point you might consider retiring and living indefinitely on your $85k annual investment income.

eli_gottlieb 13y ago
How conservative is 3% above inflation? Also, who, even in the high salary brackets, can save $50k/year?
- jimminy 13y ago
  I've been running the numbers for myself, while looking into moving to SF. With current tax rates (state and federal) considered, for me as an individual being able to save/invest $50k/year would be around $100-110k salary mark.
- icedchai 13y ago
  i've done it consistently for the past 10 years. if you have some discipline, set up automatic investments, it's easier than it sounds.
  - eli_gottlieb 13y ago
    I already have a 401(k) and a normal brokerage account through Vanguard, invested in a few good index ETFs. I set it up a few months ago and I remember there's some paperwork I still have to find and handle, but mostly I haven't looked at it. When I'm actually making money I can transfer into American dollars again, I'll be dumping some fixed amount of it straight into those accounts for investment. However, I currently make far less than $50k/year due to being a grad-student, so it's not like I can save nearly that much.
- chiph 13y ago
  Housing expenses (especially in SF area) make that really tough. But if you're married with both of you working, only have one (used) car, and both of you live frugally, it can be done.
- mechanical_fish 13y ago
  3% is fairly conservative: According to the calculator here: http://www.moneychimp.com/features/market_cagr.htm http://www.moneychimp.com/features/market_cagr.htm ...over the last 40 years an S&P 500 index fund had annualized returns of 10% before inflation adjustment, 5.5% adjusted for inflation. That's, like, twice as good as my guess! And no need to invest in real estate for that: That's a Vanguard index fund. Of course, over the last ten years the equivalent annualized return is only 1.5%, which goes to show you that (a) depressed global economies are no fun and (b) there is some rationale behind my choosing to use a more conservative number. As for "how does one manage to save 50k per year?", the sad answer is that I don't, and most of us probably don't. But many tech workers could, in theory. The median income in San Francisco is "only" $42k: http://blog.sfgate.com/ontheblock/2011/03/07/bay-area-tops-state-again-in-median-income/ http://blog.sfgate.com/ontheblock/2011/03/07/bay-area-tops-s... More than half the people in SF are staying alive somehow on less than $50k per year. Figure out how to live like them and it might not be hard to save $50k per year... if you have a Bay Area developer's salary. Which, obviously, is not the case for everyone. Also, making an additional $50k per year is a reachable goal, relative to most get-rich-quick schemes. It's $4200 per month. The OP is halfway there, with one $2k/mo product.

eli_gottlieb 13y ago

How conservative is 3% above inflation? Also, who, even in the high salary brackets, can save $50k/year?

jimminy 13y ago
I've been running the numbers for myself, while looking into moving to SF. With current tax rates (state and federal) considered, for me as an individual being able to save/invest $50k/year would be around $100-110k salary mark.
icedchai 13y ago
i've done it consistently for the past 10 years. if you have some discipline, set up automatic investments, it's easier than it sounds.
- eli_gottlieb 13y ago
  I already have a 401(k) and a normal brokerage account through Vanguard, invested in a few good index ETFs. I set it up a few months ago and I remember there's some paperwork I still have to find and handle, but mostly I haven't looked at it. When I'm actually making money I can transfer into American dollars again, I'll be dumping some fixed amount of it straight into those accounts for investment. However, I currently make far less than $50k/year due to being a grad-student, so it's not like I can save nearly that much.
chiph 13y ago
Housing expenses (especially in SF area) make that really tough. But if you're married with both of you working, only have one (used) car, and both of you live frugally, it can be done.
mechanical_fish 13y ago
3% is fairly conservative: According to the calculator here: http://www.moneychimp.com/features/market_cagr.htm http://www.moneychimp.com/features/market_cagr.htm ...over the last 40 years an S&P 500 index fund had annualized returns of 10% before inflation adjustment, 5.5% adjusted for inflation. That's, like, twice as good as my guess! And no need to invest in real estate for that: That's a Vanguard index fund. Of course, over the last ten years the equivalent annualized return is only 1.5%, which goes to show you that (a) depressed global economies are no fun and (b) there is some rationale behind my choosing to use a more conservative number. As for "how does one manage to save 50k per year?", the sad answer is that I don't, and most of us probably don't. But many tech workers could, in theory. The median income in San Francisco is "only" $42k: http://blog.sfgate.com/ontheblock/2011/03/07/bay-area-tops-state-again-in-median-income/ http://blog.sfgate.com/ontheblock/2011/03/07/bay-area-tops-s... More than half the people in SF are staying alive somehow on less than $50k per year. Figure out how to live like them and it might not be hard to save $50k per year... if you have a Bay Area developer's salary. Which, obviously, is not the case for everyone. Also, making an additional $50k per year is a reachable goal, relative to most get-rich-quick schemes. It's $4200 per month. The OP is halfway there, with one $2k/mo product.