Of course, nobody can reliably get 5.04% after tax and after inflation compounding returns. (And nobody was able to over the long term in the Twentieth Century in passive investments.) If you put your money in the stock market over the past decade, for example, your return would be zero. And this is one of the best times to be cashing out. Most of the last decade would have produced negative returns.<p>Less risky investments like government bonds typically return less than 1% over inflation. If you intend to save for retirement and hope to benefit from compounding, you should be prepared to depend on 1% or less returns. One percent returns will double your money in seventy-two years.<p>If you want to retire on more than Social Security, you should be prepared to save every penny you'd like to spend. Compound investment returns have always been unreliable and the development of modern finance may have eliminated those returns forever by shifting all gains to banking executives.<p>Social Security is doing much better by comparison. Or you could get yourself a government pension; those are insanely generous.
I give this same advice a lot, and it's always telling to watch people's reaction. Human nature is all about defending what you're currently doing, against all evidence that there's a better way.<p>So, yeah, it's impossible to get 5%? Are you sure about that? Over a 40-50 year period? You'd have to look pretty hard at old stock charts to find a spot where you could get overall returns that low.<p>And yes, inflation exists. It's probably still a good idea to save money for retirement though.<p>And yes, you're young and don't have as much money to spend. But you also are coming off a lifestyle where you shared a room with six guys and ate Costco ramen every meal for 4 years. As soon as anybody starts giving you money, it's money you didn't have before, so you absolutely can find a way to save it.<p>It's a lousy $1,000 per month. Figure out a way to stuff it into the market, and despite all your rationalizations, the 50 year old version of you will thank the 22 year old you.
While this graph is indeed accurate for a static income, for many people the income will increase over the years (on top of the inflation) which will cause difference to be a little less dramatic.<p>Regardless, save as much as you can as early as you can...
This is so great in theory, I've ran the calculations over, and over again. However I feel like the question marks are never filled in.<p>1.) Put 1k a month in savings
2.) do ???
3.) get > 3% compound interest
4.) enjoy a debt free lifestyle<p>where do i get > 3% return!