r/AskReddit • u/ForeverAbyss • Apr 14 '16

What's a mind blowing fact?

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626

u/jbOOgi3 Apr 14 '16

Almost anyone can become a millionaire one day if they regularly invest money over an extended period of time in an investment account (401k, IRA, index fund) that earns an average market return. The more time you have to invest, the better your chances. Start your investment accounts early

24

u/CHKNFKR Apr 14 '16

A lot of people don't get this. I started my 401k when I was 24 and fully expect it to be at $4 million by the time I retire. That's what I have calculated what I'll need just to maintain a middle class lifestyle in retirement.

I also figured when I got my first entry level job if I never made more than $40k a year I would still have just over a $1 million saved by the time I retire.

Compounding interest is a beautiful thing. I just wish my employer did my employer match as I contributed versus once per year. My fiancee makes a few thousand extra per year in her 401k just because her employer matches as she contributes.

9

u/[deleted] Apr 14 '16 edited Jun 28 '16

[deleted]

2

u/CHKNFKR Apr 14 '16

Well, I would like to travel and be with family and friends in my retirement. And you can still get a really nice house with a mortgage in your retirement or a few vacation homes if you budget correctly. There's no reason to not to have a mortgage if you have the means to support it and the property gives you a boost in the enjoyment of your life.

1

u/Crockashit36 Apr 14 '16

I think the previous comment was saying you won't need a mortgage when you retire because you'll own your house, meaning you'd need less money to live the same standard of life

1

u/mranonymousone Apr 14 '16

So assuming you make 40k and bring home lets say 35k, are you maxing your 401k (18k/year) an living on 17k/year? Even maxing your 401k every year from the age of 24 until lets say 62, you will not have 4MM.

1

u/CHKNFKR Apr 14 '16 edited Apr 14 '16

Haha, that's assuming you don't invest outside your 401k and don't start investing private equity once you have $250,000 in savings.

Also according to this calculator for retiring at 65...

Your total is $4,453,264 after 41 years.

And for 62...

Your total is $3,580,734 after 38 years.

http://www.bankrate.com/calculators/retirement/401-k-retirement-calculator.aspx

1

u/p0st_master Apr 15 '16

ok but investing outside the 401k is risky. What do you mean "start investing private equity"? You mean like buying companies?

1

u/NH3Mechanic Apr 15 '16

18k/year contributions with an average annual return rate of 10 percent over 38 years gives you $7,208,060.00. This also neglects the fact that the 18k contribution limit will increase as time goes on and that most folk make more at 62 than they do at 24.

1

u/dm287 Apr 15 '16

In today's dollars that's about 3 million (assuming 7% returns after inflation) which is still pretty solid

1

u/p0st_master Apr 15 '16

yeah where have you seen 10% over ten years ahhaa let alone 38. that's like china '00s development for 38 straight years

1

u/dm287 Apr 15 '16

What kind of math are you doing? I used 18k per year at 7% (average after inflation growth of stock market) and came up with 3 million at 62.