[misiti3780]

Compound interest is a thing. If you are fortunate to have a job that allows you to save money, and you put that money in the S&P 500 it will double every 7-10 years.

His wealth was inherited, but if you start to invest money in your 20s, and you invest every month at dont touch it, you will most likely get rich if you live to be a senior.

[sidlls]

Yes, if you are fortunate enough to have a job that allows you to save money--that's less than half the working population of the US, where the median bank account value is under $6k. Someone with a bank account that low isn't investing $2000/year starting at 20 years old to achieve a $1M (pre-tax) portfolio at age 67.

That's the whole reason people object to these "just start saving and compound returns will make you rich" myths. The fact is that only people near the right-edge or beyond of the curve in terms of income will ever "invest and be rich" in a given lifetime. It takes a combination of extreme luck and risk-taking to achieve wealth in this society.

[derekp7]

The thing that's hard to come to terms with is that there is a wide range of incomes of all those that don't make enough money to save. That is, someone making 50K a year has just as much problems saving as those who make 30K. Of course there are reasons for this -- on the lower end of the payscale people rely more on outside assistance, or they forego certain necessities that impact their quality of life. You are still having to pay every penny of income towards physical quality-of-life expenses up to a certain point, then above that level is small luxuries that have a big impact on emotional quality of life. Past that point is where you can start really saving.

[misiti3780]

I know the the numbers and I agree.

[jimbokun]

Not $188 million rich.

[peterwoerner]

Not $188 million rich, but certainly $2-5 million rich.

[clairity]

something like 60% of people can’t reach 1 million let alone 2, given their position in the lifetime income distribution. i’d be all for changing policies with the sole focus of giving everyone the opportunity, but not the right, to reach $2 million in wealth by retirement age. that would require some wealth redistribution to start, and radical shifts in how we allocate income. since that disfavors the already wealthy, it’s hard to effectuate without sustained, concerted effort by the 99%.

[peterwoerner]

I don't want to be too combative because you do have a point that, especially with kids, its hard to not live paycheck to paycheck. But if you start early all you have to do is bust your butt and live cheaply for a couple of years and wait for compound returns to kick in.

Back of the hand says that if you invest 10,000/yr from 20 to 30 you'll have saved ~$100,000. And then 7% and with the rule of 72 is then: 30: 100,000 40: 200,000 50: 400,000 60: 800,000 70: 1,600,000.

S&P is closer to 12% than 7% which means you might be able to get away with saving less aggressively or earlier retirement. If you are able bodied and willing to learn a trade you should be able to make atleast 20/hr. I made 19/hr right out of college as a manufacturing technician and saved ~1000 month. You have to sacrifice to do this e.g. live with roommates in a cheap area, rarely go out to drink/eat etc., but if you start early, don't have kids and save aggressively its very doable. I didn't completely live like a monk, I bought a canoe and went canoeing most weekends and had a rock gym membership for one year while doing this and a martial arts membership the other year. I also lived one block from the projects in a 3-1 with 3 other people so rent was tiny and ate rice and beans + chicken thighs or eggs 3-4 times a week for dinner to keep the cost of food down. Its straight forward on median salary, but you have to sacrifice. The budget is straight forward too: The budget is simple, you get 400 for rent, 400 for food, 400 for transportation, 400 for bills (internet, electric, water, sewage), 200 for health care expenses, 100 float and 100 for fun. You can even do it in SF if you do two people to a room (just like dorms in college) in a large house--transportation will goes down, rent might go up and food probably goes up as well.

You could also work 50 hours a week and save that extra 25% of salary which again at entry level in the trades would yield you close to 10,000/year (minus taxes but hello IRA). The Dave Ramsey retirement calculator says that if you save 1500/month from 22-25 you with 10% returns and no savings after that you'll become a millionaire at about age 53. You can make that happen as an entry level mechanic who lives like I did who works an average 10 hours of overtime a week.

[clairity]

don't wanna be overly combative either, and i didn't double-check the math, but that's an awful lot of constraints and assumptions built into that docket.

one i'll question immediately is 12% returns, which is quite high given historical means and a figure you'd expect a reversion to sooner rather than later. you'd also need to have a brokerage/retirement account of some sort and have enough financial literacy to know to invest in the s&p vs the thousands of other options available. you'd also have to be lucky enough not to hit a severe recession/depression too early or at another inopportune time in your life, like while having a serious medical condition.

with that said, yes, you can totally live off of $2000/mo and save $1000/mo (i've done it for a short time) if those stars do line up (like being young, having no kids, and finding $400/mo rent) for some number of months, but i'm not sure it's feasible longer term for most people most of the time. circumstances and people change.

[tstrimple]

> Back of the hand says that if you invest 10,000/yr from 20 to 30 you'll have saved ~$100,000.

So you're telling me that all most Americans have to do is put at least 1/3rd of their paycheck into savings in order to have a chance to retire well? I'm sure they will get right on that sound financial advice.

[misiti3780]

why is that not possible - warren buffet didnt inherit money and became a billionaire. it's possible to get very rich on compound interest.

[lotsofpulp]

Buffet’s dad was a federal congressman with his own investment firm, and grandparents were owners of a grocery store. Not saying he didn’t work for any of it or didn’t deserve it, but you’re not going to be Buffett by socking away 20% of your pay in a retirement account (you might be nominally if US gov keeps printing money, but not in real terms).

He certainly is an outlier in terms of intelligence and work ethic, but I would assume connections from his dad helped, as well as the family being able to afford sending their kid to good schools and NYC for further networking and education, all the way from Nebraska in the 1950s.

[misiti3780]

he is certainly and outlier, and probably a bad example, but i read his biography and if i remember correctly he started investing money he made on is paper route in stocks early on.

It's true your probably not going to make 188M, but even a lot less than that is still rich.

[lotsofpulp]

>if i remember correctly he started investing money he made on is paper route in stocks early on.

Yes, and he should be credited with taking that initiative. But note that this was the 1940s. I would posit a high probability that Buffet got advice from his educated father, who had is own investment firm, that 99% of children would never get because they didn't have someone as capable as Buffett's father. And/or the other paperboys had to chip in and help feed their family unlike Buffett who could afford to lose his paper route money and not sacrifice anything essential (again, presumably, but I think it's a good guess).

Even nowadays, with the ease of the internet, I would say that simply having parents who know what a low cost broad market index fund is puts you a standard deviation above the median average in terms of how good of a start you have in life.

[misiti3780]

I do not think most (sane) people would disagree that

1. life is not fair

2. there is no such thing as self-made men/women. luck play plays a role in everything, from the country you were born in to the genes you contain.

I was just making an observation about how great and effective compound interest is.