Submitted 1 year ago by lobut@lemmy.ca to aboringdystopia@lemmy.world
Just let your wealth compound over time and you’ll be a millionaire, the advice goes. If this is true why aren’t more people rich?UNDERSTAND, SHARE & PUSH BACK
I heard Gary Stevenson talk on this subject recently and his argument was that saving money has the opposite effect of borrowing money. If you try to save money you lose money in real terms due to the combined effects of low interest and high inflation. This has been the case since 2008 and became more acute following COVID.
This doesn’t need to be a 20 minute video.
While money in a bank does technically grow exponentially, the real value (what you can buy with that money) of the account grows slower than the economy.
Meaning each year you can actually buy less with the money you keep in a bank account. This is why retirement accounts are typically tied to the stock market, to try to tie their growth more to the economy.
This doesn’t need to be a three paragraph comment. The point is that petrol-dollars are constantly devaluing much fast than any bank will give you interest. This is why people gamble on the stock market, because “saving” doesn’t exist.
It takes money to make money and I ain’t ever had the money needed to make more.
Most of the video applies to a Millennial and younger audience. These generations got screwed on the necessary components for compounding to work. Forced to pay for exponentially more expensive education than generations prior put them deep into debt right out of the gate. Further, they entered the workforce during the Great Recession which forever put them 10 to 15 years behind in earning power. Lastly, saddled with the two other things, it prevented many from buying homes which appreciate in value.
In short, the younger generations got totally screwed. The compound interest promise still works for X-ers and above.
I agree with the very ending premise: We need to massively tax the ultrawealthy.
He’s talking about his grandparents ending up at 0 or below as well. Whatever we manage to save before retirement isn’t adequate to pay for elder care (unless you’re lucky enough to drop dead randomly), and most of us can’t build generational wealth to pass on. Basically the wealthy will end up buying whatever assets you have accrued over your lifetime.
I don’t want to watch the 20 minute video but yeah, I started 30 years ago when it was possible to pay rent and put aside a little. I’m no longer putting any aside, my $75k a year job just keeps the lights on now
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?
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%.
Kids
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.
“$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.
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
Gary’s Economics is an incredible channel
I need compounds for there to be interested.
source_of_truth@lemmy.world 1 year ago
I fucking love Gary. The only person telling it like it is.
TAX THE RICH or they will eat us.
lobut@lemmy.ca 1 year ago
Did you see his Piers Morgan interview?
It would have been easy for Gary to be a class traitor and turned his back on us after making his money and telling us to “work harder” or something like that.