Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
If you invest $750 every month for 20 years at a 7% return, how much it will be worth?
I used my HP-12C calculator. I came up with $390,694.99 or $390,695 when rounded but it is close enough. It just proves the value of money over time contingent on the rate of return.
The following is more impressive. If investor A saved $1000 a month for 10 years at 8% annually from the age of 25 to 35 and stopped. The money is still invested for another 30 years at 8% annually without additional savings. Investor B started at age 35 and save $1000 a month for 30 years at 8% annually. After 40 years Investor A (about 1.8+ million) will have more money than investor B (about 1.49 million) It's the power of starting early + compounding.
I love these fantasyland hypothetical scenarios that presume that A. most Americans have $750 extra a month to stash in the stock market and B. that the stock market's past returns will be the same in the future. Depending on which study you believe, on the low end, 40% of Americans have less than $1,000 in liquid assets to invest: https://bankrate.com/banking/savings/financial-security-january-2020/ But more importantly, who can say with any honesty what the next 20 years of stock performance will bring? No one.
The difference arises from the payment at the beginning or the end of the month. I changed the HP-12C to "beg" and I received $392.974.05 The calculator was set to "end", my total is $390,695 (rounded).
I don't think it's really fantasyland. It just gives you an overall feel for the numbers.
But yes, $750 a month is a lot. And 20 years is a long time. And 7% is a good return. That's a lot of consistency and discipline. And a lot of work, if the invested money was earned from a job or business.
I guess $390K is better to have than not to have, but I would have hoped to see a larger sum. Gives you some idea how much money we are talking about when we talk about millions. By my nature I'm an investor and a slow builder, but maybe we're chumps.
1. 76 percent of Americans are living paycheck to paycheck 2. 62 percent of Americans have less than 1,000 dollars in their savings account 3. 65 percent of those 65 and older have less than $25,000 in retirement 4. 21 percent of all Americans have no savings account at all 5. 43 percent of American households spend more money than they make each month 6. Middle-class Americans today make up a minority of the population. In 1971, 61 percent of all Americans lived in middle-class households 7. In the last 14 years, median income of middle-class households declined by 4 percent 8. Median wealth for middle class households dropped by an astounding 28 percent between 2001 and 2013 9. Middle class take-home pay before expenses has plummeted to just 43 percent of gross pay, compared to 1970 when the middle class took home approximately 62 percent of all income 10. There are still 900,000 fewer middle-class jobs in America than there were when the last recession began 11. According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year
So yeah, I think saving $750/mo is out of reach for a large percentage of the US population.
I agree with you. I think you misinterpreted what I meant when I said it wasn't fantasyland. What I was saying is it's just a thought experiment with numbers. I wasn't saying that most people can do it.
Tomorrow (September 30) Price’s 40/60 conservative balanced fund TRRIX celebrates its 18th birthday. Since inception, Lipper shows the fund averaging 6.25% - not too far from the 7% figure being batted around here. That was than this is now? Think again. Over the past 5 years the return is even better - averaging 6.47%. Lipper
My own take (based on recollections) is that 7% was pretty easily attainable for a conservative investor in the 70s thru the 90s and up until roughly 5-10 years ago when bond yields began to scrape bottom - where they remain today.
It’s hard finding anything good on the subject. Google it and you’re apt to get a bunch of investment advertisements promising to bring you remarkable returns. Sure! I’m linking an article from The Motley Fool I think does a decent job on the 7% subject. Fool
A young investor should be at 70/30, maybe even 80/20. I started investing in my late 30" and was at %100 stocks. After about 5 years I changed to about 85-90% stocks and only about 8 years prior to retirement I changed gradually but rapidly to more bonds when I was sure to hit my retirement date.
1. 76 percent of Americans are living paycheck to paycheck 2. 62 percent of Americans have less than 1,000 dollars in their savings account 3. 65 percent of those 65 and older have less than $25,000 in retirement 4. 21 percent of all Americans have no savings account at all 5. 43 percent of American households spend more money than they make each month 6. Middle-class Americans today make up a minority of the population. In 1971, 61 percent of all Americans lived in middle-class households 7. In the last 14 years, median income of middle-class households declined by 4 percent 8. Median wealth for middle class households dropped by an astounding 28 percent between 2001 and 2013 9. Middle class take-home pay before expenses has plummeted to just 43 percent of gross pay, compared to 1970 when the middle class took home approximately 62 percent of all income 10. There are still 900,000 fewer middle-class jobs in America than there were when the last recession began 11. According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year
So yeah, I think saving $750/mo is out of reach for a large percentage of the US population.
The above report is from 2015. What happened to Median household income in the United States from 1990 to 2019? It went up very nicely from 2015 to 2019 under you know what president (link) (link)
@LewisBraham My key point: Trump is the first president since 1998 to increase the median income significantly but I can't find it in the Lib media.
You are absolutely correct about the gap. It started decades ago under both Dems+GOP presidents and will continue that way. - Jobs in STEM will continue to make more while most others will not. - CEOs now are making 250-300 times their average employee while they used to make about 30 times in the 80" - We are in a global comparative world where goods/services have been going to cheaper places. - Easier repetitive jobs are replaced by automations and robots. The scary thing, more complicated jobs have been replaced too and median jobs disappeared.
My point is that median income increase under the current president was driven more by the top than the middle and bottom. Also, it is evident that for most Americans $750 a month into the stock market is fantasyland.
The current U.S. minimum wage is $7.25 an hour. An 8-hour 5-day work week nets $290. A month’s work nets about $1160.00. Those $750 monthly contributions would consume 65% of the individual’s pay. (Hopefully, there’d be minimal payroll taxes.) After contributing the $750, the individual would have about $400 left over - or $100 per week to survive on.
Any suggestions for living on $100 weekly? In the early going I’d watch at groceries for the 50% clearance sales on hot dogs and other packaged meats when the marked date was about to expire. Still perfectly fine eating. For drinking? There’s Old Milwaukee in a pinch. Haven’t tasted it in years. Rough around the edges. But in this case, you’d be drinking to your eventual riches. Might make it more palatable.
BTW - Attempts to raise the minimum wage are met with admonition by some that the lower wage is better for workers because if they were paid more they’d be replaced by automation or a foreign worker. So the lower wage is being kept in place to benefit them. Chop-logic. Gotta love it!
The above report is from 2015. What happened to Median household income in the United States from 1990 to 2019? It went up very nicely from 2015 to 2019 under you know what president
@LewisBraham My key point: Trump is the first president since 1998 to increase the median income significantly but I can't find it in the Lib media. ...
Comments
If investor A saved $1000 a month for 10 years at 8% annually from the age of 25 to 35 and stopped. The money is still invested for another 30 years at 8% annually without additional savings.
Investor B started at age 35 and save $1000 a month for 30 years at 8% annually. After 40 years Investor A (about 1.8+ million) will have more money than investor B (about 1.49 million)
It's the power of starting early + compounding.
here. And here.
https://www.buyupside.com/calculators/recurringinvestmentcalculatordec07.htm
Don't know where the difference comes in.
But more importantly, who can say with any honesty what the next 20 years of stock performance will bring? No one.
But yes, $750 a month is a lot. And 20 years is a long time. And 7% is a good return. That's a lot of consistency and discipline. And a lot of work, if the invested money was earned from a job or business.
I guess $390K is better to have than not to have, but I would have hoped to see a larger sum. Gives you some idea how much money we are talking about when we talk about millions. By my nature I'm an investor and a slow builder, but maybe we're chumps.
1. 76 percent of Americans are living paycheck to paycheck
2. 62 percent of Americans have less than 1,000 dollars in their savings account
3. 65 percent of those 65 and older have less than $25,000 in retirement
4. 21 percent of all Americans have no savings account at all
5. 43 percent of American households spend more money than they make each month
6. Middle-class Americans today make up a minority of the population. In 1971, 61 percent of all Americans lived in middle-class households
7. In the last 14 years, median income of middle-class households declined by 4 percent
8. Median wealth for middle class households dropped by an astounding 28 percent between 2001 and 2013
9. Middle class take-home pay before expenses has plummeted to just 43 percent of gross pay, compared to 1970 when the middle class took home approximately 62 percent of all income
10. There are still 900,000 fewer middle-class jobs in America than there were when the last recession began
11. According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year
So yeah, I think saving $750/mo is out of reach for a large percentage of the US population.
More Here
My own take (based on recollections) is that 7% was pretty easily attainable for a conservative investor in the 70s thru the 90s and up until roughly 5-10 years ago when bond yields began to scrape bottom - where they remain today.
It’s hard finding anything good on the subject. Google it and you’re apt to get a bunch of investment advertisements promising to bring you remarkable returns. Sure! I’m linking an article from The Motley Fool I think does a decent job on the 7% subject. Fool
(
My key point: Trump is the first president since 1998 to increase the median income significantly but I can't find it in the Lib media.
You are absolutely correct about the gap. It started decades ago under both Dems+GOP presidents and will continue that way.
- Jobs in STEM will continue to make more while most others will not.
- CEOs now are making 250-300 times their average employee while they used to make about 30 times in the 80"
- We are in a global comparative world where goods/services have been going to cheaper places.
- Easier repetitive jobs are replaced by automations and robots. The scary thing, more complicated jobs have been replaced too and median jobs disappeared.
Any suggestions for living on $100 weekly? In the early going I’d watch at groceries for the 50% clearance sales on hot dogs and other packaged meats when the marked date was about to expire. Still perfectly fine eating. For drinking? There’s Old Milwaukee in a pinch. Haven’t tasted it in years. Rough around the edges. But in this case, you’d be drinking to your eventual riches. Might make it more palatable.
BTW - Attempts to raise the minimum wage are met with admonition by some that the lower wage is better for workers because if they were paid more they’d be replaced by automation or a foreign worker. So the lower wage is being kept in place to benefit them. Chop-logic. Gotta love it!
https://www.census.gov/library/stories/2019/09/us-median-household-income-up-in-2018-from-2017.html
what are we missing in understanding your assertion?