Why aren't we all getting rich from compound interest? - eviltoast

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

  • WR5@lemmy.world
    21·
    18 hours 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.

    • roofuskit@lemmy.worldEnglish
      5·
      17 hours ago

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

      • WR5@lemmy.world
        21·
        16 hours ago

        I feel like I’m not being clear then: that’s ONLY taking into account the potential interest earned? Touching the principal, you’d be able to go for much longer. This is coming from a place of ignorance and envy as as American with no prospect of being able to save $1 million, ever.

        • partial_accumen@lemmy.world
          3·
          14 hours ago

          I feel like I’m not being clear then: that’s ONLY taking into account the potential interest earned? Touching the principal, you’d be able to go for much longer.

          This is the gamble though. The rule of thumb is a 4.7% safe withdraw rate. Once you retire, you’ve earned all the income from wages you’ll ever earn. What money you have saved will have to last you the rest of your life which is an uncertain amount of years with uncertain expenses. You can stack the deck in your favor by doing such things as owning your home outright, but that doesn’t shield you from the sky high cost of eventually having to move into an assisted living at today’s cost of $6000/month. Who knows how much that will cost in the future? So your $50k/year is completely exhausted by the first week of August having not spent another cent on anything. You’ll have to dig into your principle to make up the difference.

        • rc__buggy@sh.itjust.works
          3·
          15 hours ago

          It’s just not safe. If I was on my own, me and my dog could ride into the sunset right now. I’m the main earner in our family, my wife takes care of the household and earns about $25k a year. Three kids, two in community college and we’re paying for it so there’s not even a little debt for them to start out.

          I need a new truck and it would be a stretch to buy a used one right now.