[loeg]

Especially over a 67 year period! If she saved about $10k (2018 dollars) annually for the first ten years of her working career, got ~4% after inflation, and never saved another penny that would account for ~$1.2 million of the sum by itself.

Buy and hold long term; reinvest dividends folks :-).

[ReallyAnonymous]

my parents have always been frugal and wise with their money. My dad lost his job at age 51 and couldn't find another job so he retired. His last salary, in 1981, was 30K a year. But he's good at the stock market. My mom says they've never touched the principal.

In addition, tax laws are written to benefit those who earn without working. The first $75k in qualified dividends is tax free. In 2017 he grossed about $120k, $80k in qualified dividends. With deductions, etc... his federal tax bill was $2k. And no social security. With their expenses about $50k, it compounds rather quickly. He's now 86.

[vladsanchez]

I must talk to your dad... Please!

[jiveturkey]

4% after inflation is not easy

[dannyw]

A S&P 500 index fund will get you that.

[ghazak]

At fees of 4/100ths of a percent. Vanguard has created a simply enormous consumer surplus. Thank you Bogle.

[badpun]

s/will get you that/has been known to get you that in the past/

Who knows what the future holds.

[adrianN]

Starting in what year?

[loeg]

Pretty much any year.

http://awealthofcommonsense.com/2016/05/deconstructing-30-ye...

> The worst 30 year return — using rolling monthly performance — occurred at the height of the market just before the Great Depression and stocks still returned almost 8% per year over the ensuing three decades.

(This number is not adjusted for inflation, but still.)

https://www.thebalance.com/rolling-index-returns-1973-mid-20...

> The S&P 500 Index, shown in bright red, delivered its worst twenty-year return of 6.4% a year over the twenty years ending in May 1979.

[dannyw]

Starting in any >25 year period since 1903, I think.

[adrianN]

I looked it up. There are long periods where it performed just above inflation. http://archive.nytimes.com/www.nytimes.com/interactive/2011/...

[loeg]

Nope. That graph is incredibly misleading. Note that the middle color represents 3-7% inflation-adjusted returns after "fees and taxes" (how are those calculated?) and the light red color represents 0-3% inflation-adjusted returns (again after fees and taxes). 6.2% is the claimed average inflation-adjusted return. A lump sum invested for 67 years at 6.2% is something like a 5500% return on initial investment.

Very few start dates yield poor returns over a 20-year period, and fewer over a 25+ year period. Much less 67 years.

I'm also not sure about the methodology of "including fees and taxes," since the average mutual fund fee has been very high until quite recently, despite Vanguard's start in the 70s, and taxes are highly individual. The article is light on details.

[MrPowers]

Yep, agreed, especially with current market conditions (high asset prices and low bond yields). Research Affiliates has an awesome tool that shows expected returns by asset class (https://interactive.researchaffiliates.com/asset-allocation....) and European equity / Emerging Markets equity are the only asset classes expected to yield 4%+ real annual returns over the next 10 years.

[djrobstep]

What if I'm hit by a bus and killed the day before I retire?

[post_break]

You're getting down voted but it's true. My mom was a few years away from retirement. Was cutting trees in the back yard and had a pain in her shoulder. Cancer in her lung. She died 8 months later. My dad and her were about to retire and just travel the world. Now I call my dad every other day because he is slowly starting to lose it.

[kalleboo]

Same thing for my grandparents. Saved and made grand plans for travel. Then grandpa got lung cancer and grandma got to travel solo instead...

I'm getting my ya-yas out in my youth.

[CydeWeys]

Not sure what your point is here -- A chance of reaching the future means you shouldn't plan for the future at all, even though statistically most people do survive to retirement age?

[hfdgiutdryg]

I think the implication is that if your spend your life toiling for future reward at the expense of present reward, you may lay there on the pavement bleeding out, wishing that you'd taken that vacation you always wanted.

Obviously it's presuming that you're neglecting reasonable gratification in the present, and it's all a spectrum of choices and rewards. But often people talk about financial investment without balancing it with "personal investment". Personal enrichment can pay interest of a sort, too.

[loeg]

I think you're maybe being too charitable with djrobstep's comment. It's an inane response to the comment it replies to. Here's the full context:

> > Especially over a 67 year period! If she saved about $10k (2018 dollars) annually for the first ten years of her working career, got ~4% after inflation, and never saved another penny that would account for ~$1.2 million of the sum by itself.

> > Buy and hold long term; reinvest dividends folks :-).

> What if I'm hit by a bus and killed the day before I retire?

It's just not responsive to the original comment and doesn't really bring up anything novel. It might be slightly more reasonable if included your elaborations, but it doesn't, and even then it's totally silly. Saving $10k/yr is not a hardship for most tech workers and does not preclude gratification in the present! $90-100k annually is still several standard deviations above median income.

[lordCarbonFiber]

What you, and most people championing the virtues of the slow and steady save, fail to consider is the time value of money (ie why those investments compound so much interest). Money today is worth more than money tomorrow is worth a truck load more than money in 67 years. Combined with the fact that, at least in my opinion, money when I'm young and healthy is also worth multiplicatively more than money post retirement.

I think most young people would rather be, and far better off with, saving that 10k annually you suggest to amassing a down payment on city property or equivalent investment in current quality of life rather than prepping for a lonely future.

[loeg]

> What you, and most people championing the virtues of the slow and steady save, fail to consider is the time value of money (ie why those investments compound so much interest).

No, we (generally) have not failed to consider it. (I'm sure some have and some haven't, but it isn't an argument that holds much water anyway.)

In fact, I think it means more or less the opposite of what you have taken it to mean.

Time value of money calculations implicitly assume return on investment! If your time value of money calculation gives you a higher value for spending some money vs investing it, your valuation of the spending must be above market returns. It's fine if that is the output of your utility function some of the time, and you do have to make a personal decision about how much to spend vs save. But I would assert that most people should value retiring with non-zero savings, and highly paid tech workers have a lot of disposable income that spending provides minimal value.

No one here is suggesting you should eat cat food and live in a cardboard box to save for the future.

> Money today is worth more than money tomorrow is worth a truck load more than money in 67 years.

Time value of money is simply making the inverse of the same slow-and-steady statement: investing the money for 67 years will yield massive returns. Your core assumption is that spending the money today will yield above-market returns. And for your first dollars, I agree! Housing, food, clothing, and (some) entertainment give huge value, far above stock-market gains.

> Combined with the fact that, at least in my opinion, money when I'm young and healthy is also worth multiplicatively more than money post retirement.

"Young and healthy" and "post retirement" are not mutually exclusive, if you save. But they certainly are if you don't — it's hard to be healthy if you can't afford food or housing.

> I think most young people would rather be, and far better off with, saving that 10k annually you suggest

First, let me be clear that the 10k figure was just for illustrative purposes of compounding at average index return rates and is not a suggestion nor rule of thumb. It's a ton for someone making poverty wages and totally insufficient for someone pulling down $500k.

The general guideline is: save at least 15% of your take-home pay for retirement, starting 40 years before you intend to retire. I think this is even a little optimistic about stock market returns and would encourage saving at least a few percent higher than that.

Note that this recommendation still leaves 80-85% of your take home pay for current spending. We're not arguing about the first 30-50% of your spending on necessities (and some luxuries may be necessary to stay sane and happy), but the marginal value of that 85th percentile spending vs saving.

> to amassing a down payment on city property

Property investment is just one kind of investment. A first property certainly has special properties as far as taxes (at least in the US) and long-term expenses, but is not incompatible with "championing the virtues of slow and steady save." I would agree that saving for a down payment on property makes a lot of sense for many people.

> or equivalent investment in current quality of life rather than prepping for a lonely future.

The key word here is "investment." Your comparison is against stock market returns, so the quality of life stuff has to be really valuable to justify the lost income.

Why do you think your future will be lonely? If you really like working, great, but many people only work because they need the current income to fund their necessities. There are other avenues for socializing than work.

[brisance]

No, grandparent is saying "carpe diem". You never know when you're going to drop dead, and being too old makes it difficult to see the world. Also, you never know when evil politicians are going to raid Social Security or change the laws to protect insurance companies that have taken on moral hazards, causing you to lose your coverage/annuity.

[lifeformed]

The point, in my interpretation, is: don't put all your eggs in the basket of your latter years. Find the balance of long term planning and short term fulfillment.

[CydeWeys]

Nobody's suggesting doing such though (yet the comment seemed to imply someone had). The suggestion was to save a meager $10K/year, which is tiny relative to the salaries of most people on here.

[sidlls]

It's 20% of the gross median household income. For the typical family it's probably closer to 25%-30% or more of their gross pay net of taxes. That's a lot of money to save for this kind of household. It's simply not a realistic goal for the majority of households in America.

[loeg]

That is a fairly unlikely outcome. Consult an actuarial table. If it happens, it happens. Not saving for retirement because you might die suddenly is irrational and defies statistics on when and how people die.

[ThrowawayR2]

> What if I'm hit by a bus and killed the day before I retire?

Isn't that question backwards? What we should be asking is: What are we going to do if we _aren't_ hit by a bus and killed the day before we retire?

[Cthulhu_]

That's the crooked part about the US retirement system, as far as I could gather it.

On my side of the pond, your employer deposits an X amount per month / paycheck into your retirement fund. That fund will play with it, invest it to get interest and make sure it keeps its value over time despite inflation.

When you quit your job, that retirement fund will continue to manage your money. When you get a new job, either the fund continues or it's done in another pension fund - you are given the option to either have what's in the old fund paid out, or transferred to your new one.

When you are fired before your retirement, no worries - the retirement fund is yours, not your employer's.

And TBF everyone should fight for that. There's nobody that will hire anyone until they retire anymore. US employment laws are too lax to enforce that. And if your retirement is directly linked to you having a job at age 65 or whatever the age is, you'll get fucked over one way or another.

[mercutio2]

I can’t tell what part of that you think is different in the US.

The US has three major retirement regimes:

- Defined contribution retirement funds, owned by the employee, managed by employer designated group

- Defined benefit retirement funds, which are going away or nearly gone for non-public-employees, and are causing the bankruptcy of various states because governments thought it was clever to offer public employees most of their compensation in the distant future to deceive present taxpayers about the cost of government

- An income distributing safety net for the elderly which is dressed up to pretend it’s a retirement program

Doesn’t sound so different from most European systems I’m familiar with, except for the much better health care (which dominates costs in old age, of course)

[eeZah7Ux]

This is, quite literally, an example of survivor bias.

Some people might be able to amass a fortune by the time they are 96 unless you die before / your index funds & co tank / you, or somebody close, need expensive treatments.