Comment on Why aren't we all getting rich from compound interest?

rc__buggy@sh.itjust.works ⁨1⁩ ⁨month⁩ ago

• WR5@lemmy.world ⁨1⁩ ⁨month⁩ ago

  Could you elaborate on that? At $1 million, that would be your yearly salary for over 13 years. At 5% yearly interest (from something like Discover) would generate $50k/yr. Why would you not be able to retire?

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  • partial_accumen@lemmy.world ⁨1⁩ ⁨month⁩ ago

    Could you elaborate on that? At $1 million, that would be your yearly salary for over 13 years. At 5% yearly interest (from something like Discover) would generate $50k/yr. Why would you not be able to retire?

    I’m not the poster you’re responding to, but I’ve know the same math they used.

    1. Here’s the flaws in that argument. 5% interest is possible today in some money market accounts, but there was about a 17 year gap between now and the last time it was 5% was in 2007. These interest rates have a high correlation to Treasury Bills. So you can’t count on getting that 5% on the regular over the 40 years of your working life. Here’s a graph of the T-Bills yields over time.

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    2. Even if you could, inflation will eat away at the value of your money especially over decades. So while $50k/year sounds like a decent amount of income in retirement, you’ll need substantially more money to maintain the same buying power. Example:

    “$50,000 in 1995 is equivalent in purchasing power to about $104,222.77 today, an increase of $54,222.77 over 30 years. The dollar had an average inflation rate of 2.48% per year between 1995 and today, producing a cumulative price increase of 108.45%.” source

    And that example is only over 30 years.

    That poster is right. Being a millionaire these days doesn’t feel rich. This is especially true with the current administration attacking the social safety net with new restrictions on Medicaid and now Social Security is in his crosshairs. Lots and LOTS of us are going to be totally screwed in retirement. Even those that have enough for themselves and their immediate family are likely going to be sharing that with a close circle of extended family or friends to keep them out of starvation and exposure to the elements from poverty. None of us except the ultra wealthy are going to have a safe and happy retirement.

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    • WR5@lemmy.world ⁨1⁩ ⁨month⁩ ago

      Yes that’s the last 30 years though. I’m not talking about past profits, I’m talking about the future. They seem to currently have enough money to secure at least a decade of spending even before taking interest into account.

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      • roofuskit@lemmy.world ⁨1⁩ ⁨month⁩ ago

        Just don’t live longer than a decade, don’t experience inflation, and don’t grow old and infirmed.

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  • rc__buggy@sh.itjust.works ⁨1⁩ ⁨month⁩ ago

    Kids

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  • reddig33@lemmy.world ⁨1⁩ ⁨month⁩ ago

    lol. 5% interest is a rarity now. The moment it starts approaching that, interest rates get cut. It never lasts. Discover is currently at 3.7%.

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  • Thorry84@feddit.nl ⁨1⁩ ⁨month⁩ ago

    I have not gotten anywhere near 5% interest the last 15 years. Best I did was around 3% and there have even been years with negative interest

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    • WR5@lemmy.world ⁨1⁩ ⁨month⁩ ago

      I have received 5% at least the last few years, but even disregarding the last I’m talking about future spending.

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