[Pfhreak]

That's a pretty low yield. That same investment in an index fund over that period is probably worth ~$40k and that's assuming you have no dividends.

Kind of a weird example to pick. Also, even if your investment lost against inflation, you still made money. Stuff that $10k into a mattress and you'll have $10k after 20 years.

[wernercd]

and that 10k will be worth less in 20 years. How many loaves of break could you buy 20 years ago? how much land? how much gas? You can buy less of it today with $10k than back then. You'll be able to buy less again in 20 years.

[Pfhreak]

Yes. I understand inflation.

I'm pointing out that a $5k return is still income. Compare:

Scenario 1: person stuffs $10k in mattress for 20 years. They have $10k at the start, $10k at the end. $0 taxes.

Scenario 2: Person invests $10k, makes $5k when they sell after twenty years. $10k start, $15k end. Pays capital gains on $5k.

Scenario 3: Person stuffs $10k in mattress, makes $5k in wages on twentieth year. $10k start, $15k end. Pays taxes on $5k.

Scenario 2 and 3 are similar, right? Both lose to inflation. The capital gains, however, have a max of 20% taxes.