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Author Topic: Compound Interest is the 8th Wonder of the World  (Read 1549 times)

Mike in NH

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Compound Interest is the 8th Wonder of the World
« on: September 01, 2020, 01:08:05 PM »
Normally I think Marketwatch is trash, and it still is, but this is interesting. It obviously makes way too much sense to put into practice, since it would require politicians thinking 50 years ahead when they can't seem to look beyond 4 years. Imagine the implications of replacing the trillion dollar SSN budget with a $26 billion solution. 

https://www.marketwatch.com/story/bill-ackman-on-saving-capitalism-every-child-in-the-u-s-could-be-given-enough-money-at-birth-to-become-millionaires-by-retirement-11598893294

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beekayworld

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Re: Compound Interest is the 8th Wonder of the World
« Reply #1 on: September 01, 2020, 02:21:29 PM »
Compounding works the other way too, inflation reducing the purchasing power year after year.

At 3% inflation, the $6750 is worth $161,000 in today's dollars. Using a 4% withdrawal rate, each individual will have to live off of $6,400 per year.
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Mike in NH

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Re: Compound Interest is the 8th Wonder of the World
« Reply #2 on: September 01, 2020, 02:30:39 PM »
Well in that case, I guess I should unretire and beg for my job back. There's plenty of room between $26 billion and one trillion to make worthwhile adjustments. I'm just happy it was put out there as an idea worthy of discussion. 
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marty998

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Re: Compound Interest is the 8th Wonder of the World
« Reply #3 on: September 01, 2020, 04:10:50 PM »
I like this idea.... been wondering if something similar could replace the Australian age pension system (say, I’m 67 years time).

However you’re relying on governments not to tinker with the system for that long, and investment providers not to skim too much in fees or blow it up with bad investments.

Three generations is a long time for no fuckups to occur. People gain and lose fortunes in that time.
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wageslave23

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Re: Compound Interest is the 8th Wonder of the World
« Reply #4 on: September 02, 2020, 08:45:01 AM »
Quote from: beekayworld on September 01, 2020, 02:21:29 PM
Compounding works the other way too, inflation reducing the purchasing power year after year.

At 3% inflation, the $6750 is worth $161,000 in today's dollars. Using a 4% withdrawal rate, each individual will have to live off of $6,400 per year.

Bingo.  Reality is a bitch.  Even if you assume 6% inflation adjusted returns, you are only looking at about $500k.  Or every individual could just save $40k by the time they are 30 and they would have the equivalent savings by retirement.  But who wants individual responsibility and accountability? 
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