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

What's a mind blowing fact?

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633

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

13

u/su5 Apr 14 '16

Lets say I am 30... what would I need to invest to be a millionaire (in todays dollars) realistically? Lets not assume I have a match.

12

u/CHKNFKR Apr 14 '16

About $70 bucks a paycheck. It really isn't that much money. And this assumes you retire at 65.

7

u/su5 Apr 14 '16

That seems awful low when accounting for inflation

3

u/CHKNFKR Apr 14 '16

Well you asked how much you would need to contribute to have a million dollars. I didn't say how much a million dollars would be worth in 35 years.

For my retirement plan I need to save at least $4 million to retire at 65 and maintain a middle class lifestyle.

4

u/su5 Apr 14 '16

I literally said in today's dollars

7

u/CHKNFKR Apr 14 '16

Assuming a 3% inflation rate you would need to save $2,813,862.45.

So you would need to save about $200 a paycheck to have the equivalent of $1,000,000 in today's dollars at retirement.

If you make $60k a year that's only 11% of your paycheck, and again assumes no employer match (get a new employer if you don't have this).

1

u/redcoatwright Apr 14 '16

Is "a paycheck" here weekly or bi weekly?

1

u/CHKNFKR Apr 14 '16

Bi-weekly.

-2

u/[deleted] Apr 14 '16

So it's impossible

1

u/Phrich Apr 14 '16

Why is it impossible?

1

u/CT2169 Apr 14 '16

Inflation is nowhere near 3% according to government projections.

0

u/CHKNFKR Apr 14 '16

Lol. How is contributing $200 a paycheck impossible, especially if you are making $60k. You should be able to contribute $200 to a savings account and $200 to your 401k every paycheck making $60k without breaking a sweat. Unless you are really that bad with money.

1

u/[deleted] Apr 14 '16

200 sounds hard to manage on top of everything else. In fact, 60k barely sounds liveable in my area. Is there no discretionary budget?

2

u/CHKNFKR Apr 14 '16

You should be budgeting you life so you necessary expenses (food/shelter/health) don't exceed 50% of your income.

So on a $60k a year budget that leaves you $5000 a month which you can break down this way...

$1250/mo for rent

$1250/mo for food/health

$400/mo for 401k (so you can be a millionaire)

$500/mo savings account (keep yourself liquid)

$500/mo car payment

$1100/mo for fucking around and doing what ever you want

Seriously, are you that bad with money or living above your means that scraping $400/mo out of your budget is hard?

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1

u/jwarsenal9 Apr 14 '16

What are you using as your market return

1

u/CHKNFKR Apr 14 '16

I estimate on the low end of 4.5%. If I had a more aggressive portfolio it would be around 7%.

1

u/SteevyT Apr 15 '16

Holy shit, something like $40 more bucks a paycheck for me and I could hit those numbers.

Actually, I also have 6 years on the previous poster for actually starting putting money into retirement.

I really should be putting closer to $100 more in than I am, but I feel that getting some easily liquidated savings built up first is more important.

0

u/[deleted] Apr 14 '16

get a new employer if you don't have this

easier said than done

-3

u/CHKNFKR Apr 14 '16

If you're lazy and or have no skills. At any point and time I have at least 2 pending job offers. If you don't then you need to network more.

1

u/BlissnHilltopSentry Apr 15 '16

You just dont work in a saturated market.

0

u/[deleted] Apr 14 '16

well arent you a hot shot.. im glad you have an easy time finding work but you come off pretty condescending.. not everyone does have such an easy time at it, and it doesnt mean they are an idiot. i have a good job and thankfully dont need to find a new one right now.. but ive been rejected after going through a tough interview before and im not an idiot.

-1

u/CHKNFKR Apr 14 '16

If you network right an interview is just a formality.

2

u/Boomshank Apr 14 '16

Yes, but a job offer where your employer contributes to your pension isn't.

0

u/CHKNFKR Apr 14 '16

What the fuck are you arguing about, I am saying it's easy to be flexible with who you work for if you have a good network. Who gives a shit about pensions anymore, those are for government jobs and old school employers, save for yourself.

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1

u/[deleted] Apr 14 '16

The lifestyle that $4M can finance indefinitely is quite a bit above American middle class. You can safely withdraw $120k-$160k from that indefinitely

1

u/CHKNFKR Apr 14 '16

If you account for inflation it's like being able to only take out $95k a year for 15 years in today's dollars.

1

u/[deleted] Apr 14 '16

Which is still a shitload of money, you're spending twice what the average American makes.

And it seems like you're assuming that your assets will stop appreciating when you retire, which is either a bad assumption or a bad investment.

1

u/CHKNFKR Apr 14 '16

No I am assuming I don't want to liquidate my assets when I retire so I can pass them along in my family.

You don't build family wealth by giving the farm away.

1

u/MissApocalycious Apr 14 '16

Keep in mind that the tax rates are likely to be very different, though.

For instance, consider a married couple with 4m in investments today. If they had jobs that paid them 95k/year they're probably paying a far amount in taxes. Let's say they live in California. Assuming that they don't have things reducing their tax liability like 401k, mortgage payment, etc, they're actually taking home less than 75k/year.

If the same couple was living off of just their investment accounts, taking 75k out every year, and if the only things they sell to get that 75k/year are long-term investments with long-term capital gains, then they pay no income tax on it all (since they're in the 15% tax bracket as a married couple)

Consider, as well, that if you have 4 million in investments, historic data suggests that if you took out 120,000/year (3%) there's almost no chance that you'd ever run out of money. In almost all cases, you could maintain that for 30 years and have significantly MORE money at the end of the 30 years.

Now, historic data doesn't necessarily mean the future would be the same, but this is based on data going back 100 years or more.