Comments on: Save only $125,000 and become a millionaire. http://scott.stawarz.com/finance/save-only-125000-and-become-a-millionaire/ Wed, 16 Feb 2011 06:25:38 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Stephan Wehner http://scott.stawarz.com/finance/save-only-125000-and-become-a-millionaire/#comment-2 Stephan Wehner Sun, 10 Jan 2010 05:53:04 +0000 http://scott.stawarz.com/?p=68#comment-2 I don't think you took into account the effect of inflation, or did you? $ bc bc 1.06.94 Copyright 1991-1994, 1997, 1998, 2000, 2004, 2006 Free Software Foundation, Inc. This is free software with ABSOLUTELY NO WARRANTY. For details type `warranty'. 1.11^21 8.94 1.09^21 6.10 6.1 * 125000 762500.0 (Using a slightly different annual return of 11%, which is actually slightly higher than your "double your money every 7 years.") So with a (low) estimate of 2% inflation per year, your 125,000 dollars-when-you're- 40, may well be only worth 762,500 dollars-when-you're-61. The same would apply "backwards" (when you start saving at 19). Some references; there may be better ones: * http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm * http://shlang.com/stock-market/ Stephan I don’t think you took into account the effect of inflation, or did you?

$ bc
bc 1.06.94
Copyright 1991-1994, 1997, 1998, 2000, 2004, 2006 Free Software Foundation, Inc.
This is free software with ABSOLUTELY NO WARRANTY.
For details type `warranty’.
1.11^21
8.94
1.09^21
6.10
6.1 * 125000
762500.0

(Using a slightly different annual return of 11%, which is actually slightly higher than your “double your money every 7 years.”)

So with a (low) estimate of 2% inflation per year, your 125,000 dollars-when-you’re- 40, may well be only worth 762,500 dollars-when-you’re-61.

The same would apply “backwards” (when you start saving at 19).

Some references; there may be better ones:

* http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm
* http://shlang.com/stock-market/

Stephan

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