[Andre_Wanglin]

Saving $5000 per year for 75 years compounded annually at 6.2% would net you a little over $8M. An unremarkable return on an unremarkable savings rate.

[davidgay]

I don't think a 21year old secretary was saving the equivalent of $70k 2018 dollars in 1943.

[loeg]

The $5k figure is in 2018 dollars and the rate of return is inflation-adjusted.

[pliny]

That's not true, you only get to that figure with 5,000 nominal dollars and 6.2% unadjusted interest

  >>> def comp(s, n, i):
  ...     m = 0
  ...     for x in range(n):
  ...             m *= i
  ...             m += s
  ...     return m
  ...
  >>> comp(5000, 77, 1.062)
  8201943.704759633

So there were some abnormal returns (or inheritance) involved.

[xorfish]

https://dqydj.com/sp-500-return-calculator/

Average dividend reinvested and inflation adjusted return between 1949 and 2016 is 7.5%

  >>> def comp(A, n, i):
  ...     m = 0
  ...     for x in range(n):
  ...         m += i**x
  ...     return A/m
  ... 
  >>> comp(9000000, 67, 1.0725)
  6053.012676780852

Assuming costs of 0.25%, she needs to invest a little over 6000 2016 USD per year to get 9 million USD.

[loeg]

I think your program confirms rather than disputes my comment.

[pliny]

My program adds 5000 nominal dollars to a savings account every 'year' and then applies a 6.2% interest rate once a 'year'.

Where is the '2018 dollars'? The account takes the same nominal deposit at year 0 as at year 76.

Where is the adjustment for inflation in the interest rate? The account adds 6.2% every year regardless of that years inflation.

EDIT: The program obviously cannot account for inflation since it has no notion of inflation. If the secretary were depositing 5000 '2018 dollars' in 1947, then the nominal deposit would have to be something like $500. Inflation is usually positive, so money in the past is worth more.

[ascorbic]

6.2% is the average, inflation-adjusted rate.

[Andre_Wanglin]

It's an example. I bet she was saving way more than $5000 for most of that time.

[garmaine]

Who said anything about $70k?

[Mtinie]

Andre_Wanglin alluded to it, though $70k was a slight overstatement.

With the effective inflation rate, $5,000 in 1947 was equivalent to $58,035 in 2018.

https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=5000&year1=194...

[Retric]

He was using 5k inflation adjusted dollars so starting with ~350 actual $/ year in 1947.

Really, just do the calculation.

[newnewpdro]

Parent is stating $5k in 1943 dollars is $70k in 2018 dollars (a claim I did not verify).

[garmaine]

6.2% would be inflation adjusted returns. Actual inflation adjusted returns were 7.4%. So investing the equivalent of $5k each year from then until now (so starting at $350 or whatever) would yield >$8.2M.

[CamelCaseName]

All it takes is one remarkable variable -- age.

The same values taken for a 50 year period are only $1.65MM, nothing to sneeze at, but a far cry from $8.2MM.

[kbutler]

This is overly dismissive. Age and duration are important, but the saving is also necessary.

100 years of living barely within your means won't leave $8.2MM or $1.65MM.

[ascorbic]

Never retiring, so never drawing on the principal is going to make a significant difference,

[hunter23]

You are neglecting inflation. There was no way this secretary was saving $5000 a year 75 years ago - her yearly salary was mostly likely around that amount.

[loeg]

The 6.2% return on investment is after subtracting inflation. Think of the $5k in 2018 dollars.

[Andre_Wanglin]

I didn't need to consider inflation to make my point.