unwitting_gulag wrote: ↑Sat Aug 31, 2024 4:36 pm
I ran these numbers in Excel... assume $20K annual savings, for 35 years. No inflation and no increase in savings (keep it simple. Column 1 is 5% annual return, and column 2 is 10%... over 35 years. I post the spreadsheet, if you like:

@ 5% @ 10%

Year dollars @5 dollars @10
0 0 0

1 20000 20000

2 41000 42000

3 63050 66200

4 86202.5 92820

5 110512.625 122102

10 251557.8507 318748.492

15 431571.2718 635449.6339

20 661319.0821 1145499.99

25 954541.9764 1966941.189

30 1328776.95 3289880.454

35 1806406.147 5420487.37

unwitting_gulag,

What does 20K means to this person in terms of annual expense?

A) 10% of the annual expense. The annual expense is 200K per year. It takes 35 years of continuous full employment at 10% return to reach 5+millions and retired.

Starting Net Worth 0%

Annual Savings 10%

Years

Annual Return Rate 25 26 27 28 29 30 31 32 33 34 35

5.00% 477% 511% 547% 584% 623% 664% 708% 753% 801% 851% 903%

6.00% 549% 592% 637% 685% 736% 791% 848% 909% 973% 1042% 1114%

7.00% 632% 687% 745% 807% 873% 945% 1021% 1102% 1189% 1283% 1382%

8.00% 731% 800% 874% 953% 1040% 1133% 1233% 1342% 1460% 1586% 1723%

9.00% 847% 933% 1027% 1130% 1241% 1363% 1496% 1640% 1798% 1970% 2157%

10.00% 983% 1092% 1211% 1342% 1486% 1645% 1819% 2011% 2223% 2455% 2710%

B) 50% of the annual expense The annual expense is 40K per year.

With an annual return of 5%, it takes 25+ year to reach 25X

With an annual return of 10%, it takes 18+ year to reach 25X

Starting Net Worth 0%

Annual Savings 50%

Years

Annual Return Rate 18 19 20 21 22 23 24 25 26

5.00% 1407% 1527% 1653% 1786% 1925% 2072% 2225% 2386% 2556%

6.00% 1545% 1688% 1839% 2000% 2170% 2350% 2541% 2743% 2958%

7.00% 1700% 1869% 2050% 2243% 2450% 2672% 2909% 3162% 3434%

8.00% 1873% 2072% 2288% 2521% 2773% 3045% 3338% 3655% 3998%

9.00% 2065% 2301% 2558% 2838% 3144% 3477% 3839% 4235% 4666%

10.00% 2280% 2558% 2864% 3200% 3570% 3977% 4425% 4917% 5459%

C) 100% of the annual expense. The annual expense is 20K per year.

With an annual return of 5%, it takes 16+ year to reach 25X

With an annual return of 10%, it takes 13+ year to reach 25X

Starting Net Worth 0%

Annual Savings 100%

Years

Annual Return Rate 12 13 14 15 16 17

5.00% 1592% 1771% 1960% 2158% 2366% 2584%

6.00% 1687% 1888% 2102% 2328% 2567% 2821%

7.00% 1789% 2014% 2255% 2513% 2789% 3084%

8.00% 1898% 2150% 2421% 2715% 3032% 3375%

9.00% 2014% 2295% 2602% 2936% 3300% 3697%

10.00% 2138% 2452% 2797% 3177% 3595% 4054%

It is the saving rate based on the annual expense that matters. If someone does not save enough as compare to their annual expense, being more aggressive does not help.

KlangFool

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