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He's not counting inflation and 11.3% is a super optimistic expectation of future S&P500 returns. A more conservative estimate for real returns would be 6.5% [1
by jvm 11y ago
He's not counting inflation and 11.3% is a super optimistic expectation of future S&P500 returns. A more conservative estimate for real returns would be 6.5% [1] (and internationally returns to equities actually average lower). When I punch those numbers into a calculator [2] I get $65k which is ahem not as impressive.
[1] http://www.nickinrichland.com/starbucks-broke/ http://www.nickinrichland.com/starbucks-broke/
[2] http://www.moneychimp.com/calculator/compound_interest_calculator.htm http://www.moneychimp.com/calculator/compound_interest_calcu...
- throwaexpon 11y agoExactly. 11% returns is crazy high and a 44 year window is quite long. Under more realistic assumptions it's mid-5-figures.
- to3m 11y agoBy that calculator, $1300/year (52 weeks/year * 5 days/week * 1 coffee/day * $5/coffee) over 47 years (aged 18-65) assuming 6.5% gets you nearly $400,000... ($65,000 is definitely way off! 1.065^47=19, very roughly. So let's assume you just invest $1300/year for 3 years then go back to buying coffees. What's a ballpark figure for how much you'll have aged 65 after that? Figure very approximately $1300 * 3 * 19 = $74,100.)
- jvm 11y agoAgh you're so right! Sorry Sunday morning biff, I had $5/week not $25.
- nicholascolby 11y ago$5/day, $25/week, $100/mo, $1200/yr compounded over 47 years at 6.5% is $382,849.60. The interest rate may be exaggerated, but the benefits of saving are clear.