[idrios]

Honestly, I agree with everything you just said. I will say that if you continue the pattern for 20 years you end up with $200k, of which $83k was made in interest -- and after 30 years you'll have $400k, $200k made from interest. Meanwhile, the S&P 500 averages about 11% interest annual. The article is vague on some details, but if you did what it sounds like the man in the article did and invested $500/year into the S&P 500 from 18 until 98, you would have $240 million at the end.

But that's money that you would never be able to spend because it's only accumulating for as long as it's still in the S&P 500. This millionaire would wear clothes with holes in them, and probably never traveled or spent money on any of the things outside of basic necessities. I wouldn't enjoy that lifestyle.

Also, as will definitely be pointed out by someone, $500/year is not bad for any person with a reasonable income. But $500/year for someone living paycheck to paycheck is not possible.

[voisin]

Another thing not considered is how much harder it becomes to maintain the return at higher bases, while diversifying so that there are no major drawdowns. And on the topic of drawdowns, I think this is the biggest flaw in compound interest mythology - a minor drawdown (permanent loss of some capital) in the early years causes disproportionately large effects on the end result. Best to run a Monte Carlo simulation using some assumptions for inflation, range of returns, etc. There are various websites that do this for you.

[jfengel]

The GP was talking $500/month rather than $500/year. That's a fair bit of money. It's nearly half the wage of a US minimum wage worker (and over half their paycheck, once taxes are taken out).

Even if you get a $15 minimum wage (as some places already have), it's still asking somebody to put away 25% of what they earn. That seems very unlikely. Not impossible, but a lot of life circumstances could easily result in it being impossible.