User Tag List

First 71516171819 Last

Results 161 to 170 of 204

  1. #161
    Uniqueorn William K's Avatar
    Join Date
    Aug 2009
    MBTI
    INFP
    Enneagram
    4w5
    Posts
    986

    Default

    Quote Originally Posted by CzeCze View Post
    If you want to live the glamorous lifestyles you see on some reality TV shows, you need way more than $7.5 million in assets, you need triple, quadruple that. Scratch that, a lot of those shows are fake and everything is staged and comped.
    *sigh* There goes my dreams of having a nice Crib and a pimped-out ride
    4w5, Fi>Ne>Ti>Si>Ni>Fe>Te>Se, sp > so > sx

    appreciates being appreciated, conflicted over conflicts, afraid of being afraid, bad at being bad, predictably unpredictable, consistently inconsistent, remarkably unremarkable...

    I may not agree with what you are feeling, but I will defend to death your right to have a good cry over it

    The whole problem with the world is that fools & fanatics are always so certain of themselves, and wiser people so full of doubts. ~ Bertrand Russell

  2. #162
    Cheeseburgers freeeekyyy's Avatar
    Join Date
    Feb 2010
    MBTI
    INTJ
    Enneagram
    5w4 sx/sp
    Socionics
    ILI Te
    Posts
    1,387

    Default

    $7.5 million is pretty good money, but it's not as much as some people are making it sound like. That's basically enough for an upper-middle class lifestyle. Assume the average person lives another 30 years after retirement, that comes out to $250,000 a year. That's pretty good money, but not the ridiculously high amount some people are making it sound like. A person who lives on $40,000 a year, basically the average american, would need about $1.2 million to keep the same lifestyle they've had. They may technically be a millionaire, but are by no means rich. $250,000 a year is probably enough to qualify as rich, but not ridiculously so. A person making that kind of money still has to be concerned with finances just like anybody else, etc. It's not like we're talking about Warren Buffett or Bill Gates here.
    You lose.

    _______

    RCOEI
    Melancholic-Choleric
    Respectful Leader

    Johari Window|Nohari Window

  3. #163
    Banned
    Join Date
    Nov 2009
    Posts
    2,390

    Default

    Quote Originally Posted by highlander View Post
    That's a really interesting perspective.

    Still, the effect of compounding of interest over time is pretty amazing. What you save in your 20s and early 30s has a huge impact on what you end up having 30 or 40 years later even if your compensation is a relatively small number compared to what you make later. I was astonished when I ran the numbers.
    Formula for working out the effect of inflation

    Cash Value today x (1+inflation rate)^(years)

    Formula for working out the effect of discounted returns back to present value so your head can work out the 'real' dollar value

    Cash Value in future x 1/((1+discount rate)^(years))

    -

    As Fineline says, when it comes to investment the only issue is maximising the nominal discount rate; the inflation rate is a bunk measurement.

    The other striking statistic is that to have 1 job that earns $150,000 per year, then some has to have invested a value of MORE than $7.5 Million in a company to justify the return to pay the employee that wage.

  4. #164
    insert random title here Randomnity's Avatar
    Join Date
    May 2007
    MBTI
    ISTP
    Enneagram
    6w5 sp/sx
    Posts
    9,489

    Default

    Quote Originally Posted by FineLine View Post
    So that means that your post-inflation ("real") rate of return is roughly the same at all times. Still, there's a big difference between investing at 10% and investing at 3-4%:

    Basically, when stocks gave you 10% returns and inflation averaged 7-8%, it was easy to make a million dollars. But once you retired, inflation quickly started chewing away at your principal and made it fairly worthless. If you didn't have a COLA on your investment (pension, annuity, whatever), you were screwed. You either had to make lots of millions to account for inflation, or toward the end of your "golden years" you could count on eating dog and cat food a couple times a week to save money.

    OTOH, now that investments give you 3-4% returns and inflation averages 1-2%, it's quite difficult to make a million dollars; but once you retire your principal is going to be much safer. Inflation will be so low that your principal will likely remain whole throughout your entire "golden years."

    And really, that's the entire story. If we remain in a similar slow-growth environment for the foreseeable future, then the tough part will be to earn that first or second million so that you can generate a decent income in retirement. But once you have the money, it will be much safer than it would have been in the past.
    Interesting post! The last statement entirely hinges on interest rates and inflation staying at the same rates up until we retire though....which seems very unlikely, for those of us under 50-60 or so. It seems more likely that they'll stay low for a while before going up, and who know what they'll be like in 20+ years when I start thinking about retiring. It's easily as likely that that "first million" will be difficult to accumulate, then interest rates will go up and the principle will get eaten anyway.

    -end of thread-

  5. #165
    pathwise dependent FDG's Avatar
    Join Date
    Aug 2007
    MBTI
    ENTJ
    Enneagram
    7w8
    Socionics
    ENTj
    Posts
    5,908

    Default

    Quote Originally Posted by InvisibleJim View Post
    Formula for working out the effect of inflation

    Cash Value today x (1+inflation rate)^(years)

    Formula for working out the effect of discounted returns back to present value so your head can work out the 'real' dollar value

    Cash Value in future x 1/((1+discount rate)^(years))

    -

    As Fineline says, when it comes to investment the only issue is maximising the nominal discount rate; the inflation rate is a bunk measurement.

    The other striking statistic is that to have 1 job that earns $150,000 per year, then some has to have invested a value of MORE than $7.5 Million in a company to justify the return to pay the employee that wage.
    You make it sound as if those formulas are easy. We don't know the interest rate and discount rate (in the future), we don't have reliable models. At best, we can take a guess and say it'll likely never go below zero nominal (but that's not a given, either).
    ENTj 7-3-8 sx/sp

  6. #166
    RDF
    Guest

    Default

    Quote Originally Posted by highlander View Post
    That's a really interesting perspective.

    Still, the effect of compounding of interest over time is pretty amazing. What you save in your 20s and early 30s has a huge impact on what you end up having 30 or 40 years later even if your compensation is a relatively small number compared to what you make later. I was astonished when I ran the numbers.
    Yeah, absolutely. The specific amount of the investment and the rate of return aren't all that important. It's the compounding of interest that makes investing in assets such a lucrative proposition over time.

  7. #167
    RDF
    Guest

    Default

    Quote Originally Posted by Randomnity View Post
    Interesting post! The last statement entirely hinges on interest rates and inflation staying at the same rates up until we retire though....which seems very unlikely, for those of us under 50-60 or so. It seems more likely that they'll stay low for a while before going up, and who know what they'll be like in 20+ years when I start thinking about retiring. It's easily as likely that that "first million" will be difficult to accumulate, then interest rates will go up and the principle will get eaten anyway.

    Hi Randonmity, good to see you!

    Actually, inflation isn't a danger to most investors; it mainly just hurts retirees. And even retirees have ways to protect themselves, if they stay on top of it. To break it all out in detail:

    If you're a young investor and you remain invested, it doesn't really matter to you if interest rates jump around a bit. A $100 dollar investment is a $100 investment either way. At 2% interest, $100 will earn 2 dollars. At 10% interest $100 will earn $10. It's a win either way, as long as you remain appropriately invested in assets that will earn 1-2 percentage points more than inflation (whatever it might be at any given time).

    The main thing for young people to remember is to diversify. Very low inflation (0-3%) tends to be great for bonds but not so good for stocks. Moderate inflation (4-8%) tends to be good for stocks but not so good for bonds. High or hyperinflation tends to be bad for pretty much everything except maybe tangibles like gold and real estate.

    So basically the strategy for young people is to have a mixed portfolio of stocks and bonds (and maybe some small amounts of other things like some small caps and gold stocks). That way you should prosper in pretty much any environment except hyperinflation. (And if we get into hyperinflation, everyone will take a beating equally, meaning that relative to everyone else in the economy you will still remain pretty much where you were previously.)

    Difficulties with inflation and high interest rates only really arise once you retire. Let's say that once you retire you no longer have any significant outside income; you're now living nearly or solely on the returns generated by your investments. Well, that means that you pretty much have to be invested mostly or completely in bonds; they're the only investment that gives you a really dependable stream of income. Stocks jump around too much for that. Stocks are a great long-term investment (i.e., for when you're younger and have other income to live off of), but they don't generate steady income like bonds do.

    So retirees tend to be bond-heavy, which puts them in a bad spot if we get into moderate inflation; as I said, bonds do poorly in an environment of moderate inflation.

    So that's the main differentiation to keep in mind: Young investors don't have to worry about inflation or changes in interest rates, because they have a greater risk tolerance and can invest in a wider variety of assets. With a little reading-up on the subject, they can arrange their portfolio to profit (or at least tread water) in just about any economic environment. Retirees, on the other hand, need a steady stream of income directly from the investment, which means they're very limited on what assets they can have in their portfolio. When interest rates go up, their principal starts taking a beating.

    But even then, for what it's worth, there are ways for retirees to pay a little extra and insure their principal against inflation. As I mentioned in an earlier post, pensions typically have a COLA which insures against inflation. If you don't have a pension, you can buy investments with COLAs, typically annuities. Annuities generate a steady stream of income like bonds, but they can be customized to include a COLA. Also, speaking of bonds, the government now issues inflation-protected Treasury bonds, called "TIPs."

    So when the time comes for you to retire, there are ways to protect your nest egg from inflation depending on how it's configured and what you foresee for the economy. Basically, retirees just have to keep a sharper eye on that portfolio so it doesn't slip away from them due to neglect.

    By the way, a lot of these investment vehicles weren't available to the small investor the last time inflation was really high (in the 1970s and 1980s); TIPs are new, and annuities were mainly just for institutions or the wealthy (they tended to be associated with large life insurance policies for some reason, as I remember). Back then retirees had little or no recourse when inflation hit. Nowadays, the small investor has more tools at his disposal as long as he doesn't mind doing a little homework to learn about them.

    (As a footnote, there's one other economic scenario that I haven't mentioned: Deflation. That would actually be great for retirees--it would increase the purchasing power of their principal. But too much deflation would trash the economy just as badly as hyperinflation, potentially wiping out the companies and banks that hold the retirees' pensions and investments. And it's tough for a country to work its way out of a deflationary spiral. So deflation is generally to be avoided. But FWIW, retirees prefer a low-interest-rate environment for reasons mentioned above, and light deflation would actually be a boon for them.)

  8. #168
    lab rat extraordinaire CrystalViolet's Avatar
    Join Date
    Oct 2008
    MBTI
    XNFP
    Enneagram
    5w4 sx/sp
    Posts
    2,170

    Default

    Hmmm, I'm not sure what this thread is about any more, so I'm going to adress the op. I can understand the unease . A million isn't a whole lot in this economy, but I don't understand why there seems to an assumption that people stop earning when they retire. Even if they scale back, they can still sell assets, and reinvest the money into some thing with a bit more return. Surely these people have set up have set up passive income streams, that keep earning money for them.
    Currently submerged under an avalanche of books and paper work. I may come back up for air from time to time.
    Real life awaits and she is a demanding mistress.

    [SIGPIC][/SIGPIC]

  9. #169

    Default

    Quote Originally Posted by CrystalViolet View Post
    Hmmm, I'm not sure what this thread is about any more, so I'm going to adress the op. I can understand the unease . A million isn't a whole lot in this economy, but I don't understand why there seems to an assumption that people stop earning when they retire. Even if they scale back, they can still sell assets, and reinvest the money into some thing with a bit more return. Surely these people have set up have set up passive income streams, that keep earning money for them.
    If a million's not a lot there's lots of people have a lot less to manage with.

  10. #170
    Tempbanned
    Join Date
    Apr 2009
    Enneagram
    8w9
    Posts
    14,031

    Default

    I feel like those most likely to succeed in this economy are those too busy to complain about it, and consequently those that are least likely to succeed are too focused on some external injustice to see the opportunities available.

Similar Threads

  1. Everyone in the US Knew There Might be a Housing Bubble
    By nomadic in forum Politics, History, and Current Events
    Replies: 46
    Last Post: 12-29-2009, 12:00 AM
  2. Foreign students in the US
    By Moiety in forum Academics and Careers
    Replies: 14
    Last Post: 10-12-2009, 09:57 PM
  3. Is ideology the bane of intellectual sophistication in the US?
    By coberst in forum Philosophy and Spirituality
    Replies: 11
    Last Post: 06-13-2009, 01:18 PM
  4. MBTIc votes in the US election
    By Economica in forum Politics, History, and Current Events
    Replies: 110
    Last Post: 10-31-2008, 08:38 PM
  5. Christianity's Fall from Grace (in the US)
    By mippus in forum Philosophy and Spirituality
    Replies: 20
    Last Post: 04-08-2008, 11:31 AM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
Single Sign On provided by vBSSO