Alexander

I debated posting this because it can make you feel hopeless. But I think the truth is always best found out early. Many financial gurus talk about investing $100/mo etc to get to a point with $1,000,00 when you retire. The reality of the math is this - if inflation is 3% per year, that $1,000,000 isn’t worth $1,000,000 today. Because compounding inflation is just as powerful as compounding returns. Said differently $1,000,000 in 60 years is only worth $167,000 of today’s buying power with 3% inflation. And typically w late stage capitalism, rate of inflation increases (not decreases). So what does this mean in reality? You have to 6x your goal. Ex: if you wanted to retire with $1,000,000 and $40,000 per year passive, you actually want $6,000,000 and $240,000 per year passive. If you wanted $4,000,000 and $200,000 in passive income. You really need your goal to be $24,000,000 and $1,2000,000 in passive income. Now let’s say inflation is 2.3% rather than 3% (the historical average). Okay. You’ll have overshot your goal by 50% (money will only be 1/4 as valuable rather than 1/6th). Great. Retire early. But the alternative is certainly worse. Undershoot and be a burden to the people you care about hoping for social nets which may or may not exist then. Who knows. Regardless, I’ve never seen anyone talk about this - and maybe it’s because it makes people feel hopeless. But I figure math is math and you shouldn’t be afraid to do it for yourself. Always better to overshoot and get there early than never arrive.