Turn 75,000 into 1 million

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Joejoe00
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Turn 75,000 into 1 million

Post by Joejoe00 » Thu Jan 25, 2018 9:36 pm

Any advice how to turn 75,000 into 1 million by age 65? Current age is 43...or is it impossible?

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Sandtrap
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Re: Turn 75,000 into 1 million

Post by Sandtrap » Thu Jan 25, 2018 9:40 pm

Joejoe00 wrote:
Thu Jan 25, 2018 9:36 pm
Any advice how to turn 75,000 into 1 million by age 65? Current age is 43...or is it impossible?
That's 22 years.
0. Invest in the next "Apple", "Amazon.com", etc.
1. Use the money to get a Medical degree and practice in a high paying speciality.
2. Or, pay for a law degree and get elected to governor, senator, or higher.
3. Go to work at Wall Street as a trader, ec.
4. Start a business (roll the dice), work 24/7 with no vacations and no day's off.
5. Go to Vegas. (roll the dice)
6. Buy lottery tickets, Powerball.
7. Call Saul, or Heisenberg.
Last edited by Sandtrap on Thu Jan 25, 2018 9:44 pm, edited 3 times in total.

MoonOrb
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Re: Turn 75,000 into 1 million

Post by MoonOrb » Thu Jan 25, 2018 9:41 pm

If you add nothing to the investment, you'd need to earn something on the order of 12% before fees and taxes to make this happen. There's not much paying 12% unless you want to make a big bet on one stock, or something.

If you contribute $1000/mo, though, you'll just about get there if you earn 7% before fees and taxes. Historically, this would have worked out...whether it will over the next 22 years, who knows.

livesoft
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Re: Turn 75,000 into 1 million

Post by livesoft » Thu Jan 25, 2018 9:43 pm

You can do what MoonOrb suggests, but just in case ...

... buy 20-year term life insurance with a $1,000,000 payout. And then ....
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dbr
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Re: Turn 75,000 into 1 million

Post by dbr » Thu Jan 25, 2018 9:47 pm

Yes, earn and save a reasonable amount of money every year. Invest the money in a portfolio of stocks and bonds. It is possible the amount needed to be saved would be in the vicinity of $30K/year. Most of what is needed is the saving rather than the investing. If you don't plan on saving something like that most of the things you could do to get there will be more likely to fail than to succeed. That includes most business ventures and other gambits to get a big return. It is actually possible the best use of the money would be for education at one thing or another, but you may already be launched on a useful career.

There is a lot of uncertainty in the outcome but there are models for what might be achieved.

jeffG
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Re: Turn 75,000 into 1 millio

Post by jeffG » Thu Jan 25, 2018 9:47 pm

Well, I was laid off at 40 with a grand total of 68,000 to my name. Rolled it into the Wellington fund and ignored it for 23 years, it’s now at 822,000. Add a little savings every year in the meantime and there is no reason you can’t be well over a million by the time Your 65.probably pushing 2 million.

dbr
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Re: Turn 75,000 into 1 million

Post by dbr » Thu Jan 25, 2018 9:49 pm

As you can see the various estimates of what is possible are highly dependent on how lucky you are with investment returns in your 22 year period. It is assumed that if asking here the question is about investing and not some other approach to acquiring wealth.

Sockpuppet
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Re: Turn 75,000 into 1 million

Post by Sockpuppet » Thu Jan 25, 2018 9:57 pm

My father-in-law was foolish and lost his entire retirement savings in the dot com crash. He was 50. He is now a 401K millionaire and lives comfortably. He recovered by doing 2 things:

1. Worked like Hell. He took every opportunity his company offered to maximize his income.
2. Put as much as he could into his retirement accounts and savings.

He got in trouble trying to get rich quick. Starting late in the game (or restarting) I think the above are the only realistic options.

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knpstr
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Re: Turn 75,000 into 1 million

Post by knpstr » Thu Jan 25, 2018 9:58 pm

Sandtrap wrote:
Thu Jan 25, 2018 9:40 pm
Joejoe00 wrote:
Thu Jan 25, 2018 9:36 pm
Any advice how to turn 75,000 into 1 million by age 65? Current age is 43...or is it impossible?
That's 22 years.
0. Invest in the next "Apple", "Amazon.com", etc.
1. Use the money to get a Medical degree and practice in a high paying speciality.
2. Or, pay for a law degree and get elected to governor, senator, or higher.
3. Go to work at Wall Street as a trader, ec.
4. Start a business (roll the dice), work 24/7 with no vacations and no day's off.
5. Go to Vegas. (roll the dice)
6. Buy lottery tickets, Powerball.
7. Call Saul, or Heisenberg.
How does Sandtrap fail to mention rental real estate? :shock:
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

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arcticpineapplecorp.
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Re: Turn 75,000 into 1 million

Post by arcticpineapplecorp. » Thu Jan 25, 2018 10:04 pm

fyi a million won't buy you in 22 years what it will buy you today (because of inflation). So do you need an equivalent of $1 million in today's dollars? If so, you'd better save because you'll need more than that. Or do you believe you'll need $1 million in 22 years? If so, why? How did you come up with needing $1 million in 22 years exactly?

Paul Merriman says when people have been asked how much money they'd like to have they've been giving the same answer since the 70s...yes, you guessed it $1 Million. That was a lot more money in the 70s than it is today. And yet, a million dollars is still a milestone that people keep wanting to hit.

I was talking with a coworker today about how when his daughter graduates if she starts investing $5500 in a Roth IRA from the time she's 25 to when she's 65 and earns 8% a year (yes I know, some will balk at that) she would end up with over $1 Million in 40 years ($1,424,800 source: excel =FV(.08,40,-5500). He started thinking about a 401k with $4000 in it that he cashed in his 20s (about 25 years ago) instead of rolling into an IRA. He misheard me and thought his $4000 would've be worth a million if he had invested it. I had to clarify he would have had to had continue investing each year the same amount consistently (and get those 8% returns) to get to a million. He seemed less interested at that point.

compounding's an amazing thing. 40 years of compounding is more amazing than 22 unfortunately. But you gotta start somewhere, right?
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Jags4186
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Re: Turn 75,000 into 1 million

Post by Jags4186 » Thu Jan 25, 2018 10:14 pm

$1,000,000 is still an extremely important milestone because unless you are a very high earner, “average” stock market gains will give you 1 year dollar returns more than your income.

To answer the OP’s question: if you add $1,135/mo to your savings and earn a 7% return, you will have $1,000,000 after 22 years.

Sockpuppet
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Re: Turn 75,000 into 1 million

Post by Sockpuppet » Thu Jan 25, 2018 10:56 pm

Assuming 2.5% inflation, $1 million in 22 years will be worth $581,424 in today’s dollars.

The Wizard
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Re: Turn 75,000 into 1 million

Post by The Wizard » Thu Jan 25, 2018 11:00 pm

Sockpuppet wrote:
Thu Jan 25, 2018 10:56 pm
Assuming 2.5% inflation, $1 million in 22 years will be worth $581,424 in today’s dollars.
Right.
So is the OP comfortable living on $25,000 a year in 2018?
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david1082b
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Re: Turn 75,000 into 1 million

Post by david1082b » Thu Jan 25, 2018 11:10 pm

The first 22 years of S&P 500 fund VFINX saw it turn $10k into nearly $200k http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

The last 22 years have seen VFINX turn $10k into $67k http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

So it will either happen or it won't happen if you choose an S&P 500 index fund. Those returns are not inflation-adjusted. Inflation was higher in the 1970s and 80s for example.

intothegreatunknown
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Re: Turn 75,000 into 1 million

Post by intothegreatunknown » Thu Jan 25, 2018 11:21 pm

The Wizard wrote:
Thu Jan 25, 2018 11:00 pm
Sockpuppet wrote:
Thu Jan 25, 2018 10:56 pm
Assuming 2.5% inflation, $1 million in 22 years will be worth $581,424 in today’s dollars.
Right.
So is the OP comfortable living on $25,000 a year in 2018?
Likely plus Social Security. $25,000 per year plus an average SS check can support a reasonable standard of living in retirement.

Boglegrappler
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Re: Turn 75,000 into 1 million

Post by Boglegrappler » Thu Jan 25, 2018 11:24 pm

My old HP 12c tells me that to make 75,000 become 1,000,000 in 22 years.....one needs a compound annual growth rate of about 12.5%. So you just need to choose investments that will earn about 5 times the rate on the current 10 year treasury, and you'll get there, as long as the compounding is after tax.

The only way to do that is to abandon the boglehead principles, and be another Warren Buffett in your ability as a stock selector. There is obviously some chance that the market average return will get you there. But that is not the way to bet.

This question actually highlights the point that the biggest aspect of being a boglehead is the living below your means aspect. Savings are key. Edit: Starting young helps too.

2comma
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Re: Turn 75,000 into 1 million

Post by 2comma » Thu Jan 25, 2018 11:33 pm

It took me 25 years to hit 1M with an 80/20 three fund portfolio but I got lucky with an early buyout that paid two years of pay. Then again I started out contributing less that the max and increased it with every raise and when I was eligible for catch-up contributions I did that too. If you also maxed a Roth each year with a little luck you might just make it. If you can afford to save some extra in a taxable account it should be doable.

I honestly don't remember when I first started maxing out my 401K contributions, probably took 5 years or so and we got a small match and it was a low cost Vanguard 401K plan. I contributed to a Roth some of the later years but not the entire time. My salary wasn't bad but nothing to brag about, it just took LBYM and contributing as much as possible.
Last edited by 2comma on Thu Jan 25, 2018 11:42 pm, edited 2 times in total.
If I am stupid I will pay.

jasg
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Re: Turn 75,000 into 1 million

Post by jasg » Thu Jan 25, 2018 11:35 pm

I did it, so you should be able to as well. Actually, it was $75k at 41 and $2M at 65 (and I had been retired for 5 years).

I put 15% of my gross pay into a 401k (but should have maxed out the contribution - $18.5k this year). I could not take advantage of a Roth IRA but saved aggressively - more than $2k/month for most years.

I was 80% or more stocks and went through the 2000-2002 and 2008-2009 downturns.

You will need more than a million in 22 years. If I were you I would try to take full advantage of 401k and Roth maximum contributions and invest in an aggressive Three-fund portfolio. The suggestion of Wellington is an option too - less risk but less reward is probable.

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JoMoney
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Re: Turn 75,000 into 1 million

Post by JoMoney » Thu Jan 25, 2018 11:45 pm

According to PortfolioVIsualizers Monte Carlo Simulation tool

Using a randomized sorting of past returns and inflation (which has no bearing on what future returns will be, but is probably as good a guess as any), the 50th percentile of results for $75,000 invested for 25 years is right about $1mil (just under) in nominal non-inflation adjusted dollars... If you adjusted for inflation, $1mil 25 years from now isn't likely to be anything like $1mil today.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

sambb
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Re: Turn 75,000 into 1 million

Post by sambb » Thu Jan 25, 2018 11:55 pm

fairly easy to do, if you take some risk. A few examples:

I invested in apple when the first iphone came out. THere was a noticeable difference between people who owned one, and people on the news and in forums that thought the blackberry was it. They didnt have the information. Iphone was light years ahead, and not everyone knew it. It wasnt priced in.You could pull off the same. But it takes luck and skill both.

Another option is to start a successful business.

Last option is to invest the 75k in yourself, become a better worker and employee, (particularly if you learn leadership) and you will easily make 1M.

MindBogler
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Re: Turn 75,000 into 1 million

Post by MindBogler » Fri Jan 26, 2018 8:27 am

A fairly simple analysis reveals that if the OP can max a 401k ($18,500) and Roth IRA ($5500) each year and achieve a 5% real return (CAGR), they will reach $992,580 in 22 years. This will require an aggressive portfolio and saving additional money. The poster reveals nothing about their income or expenses, so we don't know how difficult $24,000/yr of savings might be. If the OP works for a company with a 401k match the math becomes easier.

I find it very surprising the number of posts discussing individual stocks, gambling or insurance fraud to achieve a 1mm portfolio from a starting point of 75,000 in 22 years. :confused

MoonOrb
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Re: Turn 75,000 into 1 million

Post by MoonOrb » Fri Jan 26, 2018 9:08 am

MindBogler wrote:
Fri Jan 26, 2018 8:27 am
I find it very surprising the number of posts discussing individual stocks, gambling or insurance fraud to achieve a 1mm portfolio from a starting point of 75,000 in 22 years. :confused
Those posts are assuming the OP might be asking “if I add nothing to the investment how can I turn it into $1m?”

dbr
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Re: Turn 75,000 into 1 million

Post by dbr » Fri Jan 26, 2018 9:14 am

MoonOrb wrote:
Fri Jan 26, 2018 9:08 am
MindBogler wrote:
Fri Jan 26, 2018 8:27 am
I find it very surprising the number of posts discussing individual stocks, gambling or insurance fraud to achieve a 1mm portfolio from a starting point of 75,000 in 22 years. :confused
Those posts are assuming the OP might be asking “if I add nothing to the investment how can I turn it into $1m?”
Right, most of the posts tended to mention that earning and saving would be involved. The OP was not very specific.

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CyclingDuo
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Re: Turn 75,000 into 1 million

Post by CyclingDuo » Fri Jan 26, 2018 9:21 am

MindBogler wrote:
Fri Jan 26, 2018 8:27 am
A fairly simple analysis reveals that if the OP can max a 401k ($18,500) and Roth IRA ($5500) each year and achieve a 5% real return (CAGR), they will reach $992,580 in 22 years. This will require an aggressive portfolio and saving additional money. The poster reveals nothing about their income or expenses, so we don't know how difficult $24,000/yr of savings might be. If the OP works for a company with a 401k match the math becomes easier.

I find it very surprising the number of posts discussing individual stocks, gambling or insurance fraud to achieve a 1mm portfolio from a starting point of 75,000 in 22 years. :confused
A quick search of the OP's posts on the BH forums found this:

How do i figure out what tax bracket i am in? I make 52,000 per year...contribute 5500 per year to traditional ira...should i convert my traditional to a roth? I have 75500 in my trditional ira.

The good news: he has $75500 in his tIRA and he is contributing his max of $5500 a year (10.5% of his gross).

The bad news: at that rate of savings and salary, using his current tIRA balance and a 6% rate of return he will only amass $510K in 22 years.

However, is that bad news? Although everyone yodels at - and hates - the various charts like the one below. However, firms like Fidelity, T.Rowe Price, Schwab, and the Financial Planning Industry will say at age 65-67, having saved 10-12x your salary for retirement is a good savings guide - especially when combined with the Social Security income one should receive.

Image

So let's say that the OP continues on his path of maxing out the IRA, bumps it up at age 50 by another $1000 under current catch-up law, while salary increases with the pace of inflation over the next 22 years - he should at least come close to reaching the multiple outlined in the picture above. If the OP bumps up from 10.5% of his gross to at least the 15-20% range, he should have saved enough when combined with SS to continue his current lifestyle. Currently, just going by the multiples in that picture above, he is below where he should be with only $75,550 at age 43. He should be nearing the multiple of 4x his current $52K salary by age 45. So the catch-up game of boosting his savings/investing rate beyond the 10.5% of gross has got to change immediately.

Now that's different than setting a goal of $1M. For that, the...

OP needs to save $1400 per month, if we use a 6% rate of return to make it to two commas.
OP needs to save $1200 per month, if we use a 7% rate of return to make it to two commas.
OP needs to save $1000 per month, if we use a 8% rate of return to make it to two commas.

$12,000 - $16,800 per year saved on the current $52K salary would cover that range.

Joejoe00 - is there any other household income (spouse working)? Any chance you can take on a side hustle to make some extra income? Is there a 401K option where you work? How willing are you to get your budget in line, and up your annual savings from 10.5% to the 23% - 32% range?
Last edited by CyclingDuo on Fri Jan 26, 2018 9:55 am, edited 3 times in total.

The Wizard
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Re: Turn 75,000 into 1 million

Post by The Wizard » Fri Jan 26, 2018 9:31 am

What really matters is Savings Rate, imo.
Trying to extrapolate what growth might occur in coming decades, along with how much underlying inflation, is a fool's errand...
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renue74
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Re: Turn 75,000 into 1 million

Post by renue74 » Fri Jan 26, 2018 9:57 am

knpstr wrote:
Thu Jan 25, 2018 9:58 pm
Sandtrap wrote:
Thu Jan 25, 2018 9:40 pm
Joejoe00 wrote:
Thu Jan 25, 2018 9:36 pm
Any advice how to turn 75,000 into 1 million by age 65? Current age is 43...or is it impossible?
That's 22 years.
0. Invest in the next "Apple", "Amazon.com", etc.
1. Use the money to get a Medical degree and practice in a high paying speciality.
2. Or, pay for a law degree and get elected to governor, senator, or higher.
3. Go to work at Wall Street as a trader, ec.
4. Start a business (roll the dice), work 24/7 with no vacations and no day's off.
5. Go to Vegas. (roll the dice)
6. Buy lottery tickets, Powerball.
7. Call Saul, or Heisenberg.
How does Sandtrap fail to mention rental real estate? :shock:
Yes! In the last 4 years, I bought crappy slums and flipped them, had a couple rental duplexes and I tied up about $30K in the projects. (Mostly through cash out refi's, rinse repeat, etc.) Over the past 6 months, I sold off 4 properties and made about $135K on that $30K investment.

Probably put way more than $135K in my work into doing that. It's a second job definitely and you have to be a person who can deal with any type of tenant.

KSActuary
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Re: Turn 75,000 into 1 million

Post by KSActuary » Fri Jan 26, 2018 10:18 am

Surprised no one mentioned "marry well".

Also, please see NVDA thread.

Wait for the next big dump in the market then short volatility by buying puts on VXX?

dbr
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Re: Turn 75,000 into 1 million

Post by dbr » Fri Jan 26, 2018 10:21 am

KSActuary wrote:
Fri Jan 26, 2018 10:18 am
Surprised no one mentioned "marry well".

At least well enough to not get divorced. The prospects for our OP may depend more on how life goes on than on what return can be found in the market.

sailaway
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Re: Turn 75,000 into 1 million

Post by sailaway » Fri Jan 26, 2018 12:09 pm

The Wizard wrote:
Fri Jan 26, 2018 9:31 am
What really matters is Savings Rate, imo.
Trying to extrapolate what growth might occur in coming decades, along with how much underlying inflation, is a fool's errand...
Yes, goals are supposed to have actionable steps. I can't control interest rates, but I can control my spending.

alex_686
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Re: Turn 75,000 into 1 million

Post by alex_686 » Fri Jan 26, 2018 12:16 pm

FYI, to do this would require a rate of return of 12.5%. Which is high but not impossible.

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Earl Lemongrab
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Re: Turn 75,000 into 1 million

Post by Earl Lemongrab » Sat Jan 27, 2018 12:36 pm

MindBogler wrote:
Fri Jan 26, 2018 8:27 am
I find it very surprising the number of posts discussing individual stocks, gambling or insurance fraud to achieve a 1mm portfolio from a starting point of 75,000 in 22 years.
Who said anything about insurance fraud?
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

thangngo
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Re: Turn 75,000 into 1 million

Post by thangngo » Sat Jan 27, 2018 12:41 pm

Joejoe00 wrote:
Thu Jan 25, 2018 9:36 pm
Any advice how to turn 75,000 into 1 million by age 65? Current age is 43...or is it impossible?
Ask yourself how much you can save before asking how much the market can give back to you.

CppCoder
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Re: Turn 75,000 into 1 million

Post by CppCoder » Sat Jan 27, 2018 12:47 pm

Go all in with bitcoin. You might even hit your goal by March :D.

The Wizard
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Re: Turn 75,000 into 1 million

Post by The Wizard » Sat Jan 27, 2018 12:50 pm

thangngo wrote:
Sat Jan 27, 2018 12:41 pm
Joejoe00 wrote:
Thu Jan 25, 2018 9:36 pm
Any advice how to turn 75,000 into 1 million by age 65? Current age is 43...or is it impossible?
Ask yourself how much you can save before asking how much the market can give back to you.
Ask not what your portfolio can do for you, but what you can do for your portfolio...
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Hawaiishrimp
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Re: Turn 75,000 into 1 million

Post by Hawaiishrimp » Sat Jan 27, 2018 1:16 pm

Joejoe00 wrote:
Thu Jan 25, 2018 9:36 pm
Any advice how to turn 75,000 into 1 million by age 65? Current age is 43...or is it impossible?
If you don't put additional money. you will need to make 10.5% return per year to reach that goal which seems difficult.

If you put an additional ~$1000 annually. you will only need 7% return per year to reach that goal which is more feasible.

Bottom-line, the more you put in, the higher the chance to reach 1 million by 65.

Good luck.
I save and invest my money, so money can make money for me, so I don't have to make money eventually.

Trader/Investor
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Re: Turn 75,000 into 1 million

Post by Trader/Investor » Sat Jan 27, 2018 1:18 pm

Yes, it can be done but apparently from reading some of the replies not the Boglehead way. When I was a few years older than you (46) I opened an IRA with $2000 in April of 1993. Over the years through 2012 I added an additional $74545. I have taken $173,000 in distributions over the past several years and as of yesterday the account sits at just over $2,063,000.

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nisiprius
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Re: Turn 75,000 into 1 million

Post by nisiprius » Sat Jan 27, 2018 1:24 pm

Here is one piece of arithmetic you need to know how to do, and do. There are various ways to do it.

Your goal is to ¨turn 75,000 into 1 million by age 65? Current age is 43. So, that is 22 years.

Step one: Find out how many times 75,000 needs to be multiplied by, to reach $1 million. Answer: $1,000,000 / $75,000 = 13.33.

Step two: let's suppose you can earn X% per year on your investment, on average. That means that every year you are multiplying your holding by 1 + X%. For example, if X = 10%, then you are multiplying your worth by 1.10 every year. $75,000 + 10% of $75,000 = $75,000 + 0.10 * $75,000 = 1.10 x $75,000 = $82,500.

Step three: You need to solve the problem: "I want to multiply by by (1 + x), 22 times, and get the final answer of 13.33. That is,
(1 + x) * (1 + x) * (1 + x) * ... * (1 + x), 22 times = 13.33.

If you have a calculator with a key like this on it, that's your key:
Image

You want to take the "22nd root" of 13.33.

If it doesn't, but there is a key like this, then THAT'S your key:
Image

In this case, you don't want to raise 13.33 to the 22nd power. You want to take the fraction 1/22, either by calculating it and saving it, or by using parenthesis, and raise 13.33 to the fractional power, 1/22 or 0.0454545.

If you are using a spreadsheet, then in Excel and most spreadsheets, you can type a formula like this:

=13.33^(1/22)

So, using some method you know, actually do that calculation. If you have done it correctly, you should get the result: 1.12482. (Uh... it's OK to keep rounding your numbers to five or six places. It's also OK not to do it if you are in a calculator and you can carry the full-precision result.)

Remember, 1.12482 is ONE PLUS X%. So X is 12.482%.

If you are struggling with this and want to earn, it might be fun to start with $75,000 and using the correct sequence of your keys on your calculator, "add 12.482%" to it twenty-two times.

The point is: to turn $75,000 into $1 million in 22 years, you need a "compound average growth rate" of 12.482%. You need to do the equivalent of adding 12.482% to your total every year for 22 years.

This, by the way, is very close to what Bernard Madoff seemed to be doing for his clients, but, unfortunately, it was fraud.

Here is my personal reaction. How possible it is depends on your assumptions for inflation. Inflation for quite a long time has been running 2-3% or so, so 12.482% over inflation means something like "10% real," i.e. 10% per year after inflation.

This is what I personally believe.

1) I do not think there is any straightforward, ordinary investment that is safe, predictable, and reliable enough to justify planning or expecting 10% real per year.

2) From 1980 through 2001, inclusive, a period of 22 years, the total return of the S&P 500 would have grown a sum of money by 16.216X = 13.5% per year. So, it would have grown $75,000 into $1,216,200. Over that particular period of time, simply investing in the Vanguard 500 Index Fund would in fact have grown $75,000 to $1,216,200.

During that same period of time, inflation almost exactly halved the buying power of the dollar. That's an average of 3.31% per year. So, yes, over that period of time, general stock market growth was 9.86% per year. Not quite 10%/year real.

In short, it is possible but not very likely.

3) By taking more risk, e.g. possibly by investing in small-cap value exclusively, you can improve your chances of growing $75,000 to $1,000,000 in 22 years, but more risk is more risk, and you are also increasing your chances of losing money, possibly a painful amount of money.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Mickey7
Posts: 33
Joined: Tue Jun 20, 2017 1:52 pm

Re: Turn 75,000 into 1 million

Post by Mickey7 » Sat Jan 27, 2018 10:59 pm

While the OP's desire is how to turn a 75K to 1M, IMHO the desire might be restated as to how the 75K will result in a stable retirement.

If it is indeed only a desire for an investment tally, then the BHs here have shown you multiple paths that can be taken. The point raised by dbr "It is assumed that if asking here the question is about investing and not some other approach to acquiring wealth" bears asking. When the figure is approached as a retirement target, other factors need to be considered.

When the target becomes a retirement figure the initial question to be be raised is whether this will be a supplement goal or not. In the next 22 years due to inflation the sum becomes 581K (Sockpuppet) or a yearly 25K (The Wizard). As a supplement to SS this might or might not be sufficient. If it is then several paths have been charted if not, let's go elsewhere.

With the money you have both an EF and seed money. Stow the first away safely and invest the other now. The EF will keep you from taping into your investment portfolio, a habit you don't want. Then

1. If you have a signicant other, get with them for your plan. If you don't, grab the rudder.

2. Invest in yourself. Human capital is your best investment!

3. Trim your spending, invest more. Other posters have underscored this point repeatedly. LBYM

4. Make the determination if the job you have now is going to help you get where you want to go. If not see #1 and retrain.

5. If you retrain for another position, look for some place with a pension or with a healthy 401k match and get after it big time.

6. Know your goal, but don't let it master you. Live your life everyday like it is a blessing, because it is.

vested1
Posts: 1418
Joined: Wed Jan 04, 2012 4:20 pm

Re: Turn 75,000 into 1 million

Post by vested1 » Sun Jan 28, 2018 7:58 am

livesoft wrote:
Thu Jan 25, 2018 9:43 pm
You can do what MoonOrb suggests, but just in case ...

... buy 20-year term life insurance with a $1,000,000 payout. And then ....
I always thought your humor was underappreciated, and someone calling this insurance fraud proves it. Then again, I suppose it depends on if you're buying the insurance on yourself, or on someone you know. :P

wassabi
Posts: 390
Joined: Sun Feb 02, 2014 8:06 am

Re: Turn 75,000 into 1 millio

Post by wassabi » Sun Jan 28, 2018 8:11 am

jeffG wrote:
Thu Jan 25, 2018 9:47 pm
Well, I was laid off at 40 with a grand total of 68,000 to my name. Rolled it into the Wellington fund and ignored it for 23 years, it’s now at 822,000. Add a little savings every year in the meantime and there is no reason you can’t be well over a million by the time Your 65.probably pushing 2 million.
What year were you laid off? Did you add t your 68k over the 23 years it took to reach 822k?

chuckb84
Posts: 212
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Location: New Mexico

Re: Turn 75,000 into 1 million

Post by chuckb84 » Sun Jan 28, 2018 8:43 am

nisiprius wrote:
Sat Jan 27, 2018 1:24 pm
Here is one piece of arithmetic you need to know how to do, and do. There are various ways to do it.

Your goal is to ¨turn 75,000 into 1 million by age 65? Current age is 43. So, that is 22 years.

Step one: Find out how many times 75,000 needs to be multiplied by, to reach $1 million. Answer: $1,000,000 / $75,000 = 13.33.

Step two: let's suppose you can earn X% per year on your investment, on average. That means that every year you are multiplying your holding by 1 + X%. For example, if X = 10%, then you are multiplying your worth by 1.10 every year. $75,000 + 10% of $75,000 = $75,000 + 0.10 * $75,000 = 1.10 x $75,000 = $82,500.

Step three: You need to solve the problem: "I want to multiply by by (1 + x), 22 times, and get the final answer of 13.33. That is,
(1 + x) * (1 + x) * (1 + x) * ... * (1 + x), 22 times = 13.33.

If you have a calculator with a key like this on it, that's your key:
Image

You want to take the "22nd root" of 13.33.

If it doesn't, but there is a key like this, then THAT'S your key:
Image

In this case, you don't want to raise 13.33 to the 22nd power. You want to take the fraction 1/22, either by calculating it and saving it, or by using parenthesis, and raise 13.33 to the fractional power, 1/22 or 0.0454545.

If you are using a spreadsheet, then in Excel and most spreadsheets, you can type a formula like this:

=13.33^(1/22)

So, using some method you know, actually do that calculation. If you have done it correctly, you should get the result: 1.12482. (Uh... it's OK to keep rounding your numbers to five or six places. It's also OK not to do it if you are in a calculator and you can carry the full-precision result.)

Remember, 1.12482 is ONE PLUS X%. So X is 12.482%.

If you are struggling with this and want to earn, it might be fun to start with $75,000 and using the correct sequence of your keys on your calculator, "add 12.482%" to it twenty-two times.

The point is: to turn $75,000 into $1 million in 22 years, you need a "compound average growth rate" of 12.482%. You need to do the equivalent of adding 12.482% to your total every year for 22 years.

This, by the way, is very close to what Bernard Madoff seemed to be doing for his clients, but, unfortunately, it was fraud.

Here is my personal reaction. How possible it is depends on your assumptions for inflation. Inflation for quite a long time has been running 2-3% or so, so 12.482% over inflation means something like "10% real," i.e. 10% per year after inflation.

This is what I personally believe.

1) I do not think there is any straightforward, ordinary investment that is safe, predictable, and reliable enough to justify planning or expecting 10% real per year.

2) From 1980 through 2001, inclusive, a period of 22 years, the total return of the S&P 500 would have grown a sum of money by 16.216X = 13.5% per year. So, it would have grown $75,000 into $1,216,200. Over that particular period of time, simply investing in the Vanguard 500 Index Fund would in fact have grown $75,000 to $1,216,200.

During that same period of time, inflation almost exactly halved the buying power of the dollar. That's an average of 3.31% per year. So, yes, over that period of time, general stock market growth was 9.86% per year. Not quite 10%/year real.

In short, it is possible but not very likely.

3) By taking more risk, e.g. possibly by investing in small-cap value exclusively, you can improve your chances of growing $75,000 to $1,000,000 in 22 years, but more risk is more risk, and you are also increasing your chances of losing money, possibly a painful amount of money.
Nice. Here's another route to the answer, using the "rule of 72s", ie, to find the time it takes your investment to double, divide the rate of return into 72.
OR, to get a rate of return for a given "doubling time", divide the time period to double into 72. That's what we'll use.

For instance, a 9% return doubles your money in 8 years. But in this case, to get from 75,000 to 1M, you need just under 4 doublings, in just 22 years. The exact number of doublings is ln (1,000,000/75,000)/ ln(2) =3.737

The rate of return you need is double your money 3.737 times in 22 years, or once every 5.88 years.

So, the interest rate needed is 72/5.88= 12.25%

It's an approximation, but pretty close. My Dad taught me the rule of 72's when I was very young, and I've used it my whole life.

CppCoder
Posts: 789
Joined: Sat Jan 23, 2016 9:16 pm

Re: Turn 75,000 into 1 million

Post by CppCoder » Sun Jan 28, 2018 8:54 am

nisiprius wrote:
Sat Jan 27, 2018 1:24 pm
Here is one piece of arithmetic you need to know how to do, and do. There are various ways to do it.
One alternative is to use logarithms. I don't know why, but I always seem to use that route even though it's more keystrokes. But none of that is important. Nisiprius clearly found the answer:
This, by the way, is very close to what Bernard Madoff seemed to be doing for his clients,
Yes! :moneybag
but, unfortunately, it was fraud.
Doh! :oops:

SirRunsabit
Posts: 36
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Location: Earth

Re: Turn 75,000 into 1 million

Post by SirRunsabit » Wed Jan 31, 2018 9:50 pm

vested1 wrote:
Sun Jan 28, 2018 7:58 am
livesoft wrote:
Thu Jan 25, 2018 9:43 pm
You can do what MoonOrb suggests, but just in case ...

... buy 20-year term life insurance with a $1,000,000 payout. And then ....
I always thought your humor was underappreciated, and someone calling this insurance fraud proves it. Then again, I suppose it depends on if you're buying the insurance on yourself, or on someone you know. :P
As I heard it, insurance companies may agree to have the life insurance beneficiary as the insured, provided you can tell them where you’re going. :D :beer
Hi!

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