At what age your investments start making more money than you?

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TierArtz
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Re: At what age your investments start making more money than you?

Post by TierArtz » Thu Dec 07, 2017 4:47 pm

Largely for entertainment, on one of my spreadsheets, I calculate investment growth per hour the US stock exchanges are open. Using personal total return over the last 31 years (8.25%), an 8 hour day, and 252 open exchange days per year, I can presently expect to "make" $100.15 per hour. I sometimes share that figure with my kids to emphasize the importance of LBYM and the wisdom of investing.

CnC
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Re: At what age your investments start making more money than you?

Post by CnC » Thu Dec 07, 2017 4:51 pm

TierArtz wrote:
Thu Dec 07, 2017 4:47 pm
Largely for entertainment, on one of my spreadsheets, I calculate investment growth per hour the US stock exchanges are open. Using personal total return over the last 31 years (8.25%), an 8 hour day, and 252 open exchange days per year, I can presently expect to "make" $100.15 per hour. I sometimes share that figure with my kids to emphasize the importance of LBYM and the wisdom of investing.
See! This is the kind of fun stuff I am looking for. It means nothing in the long run but it is the kind of thing that makes you sit back and appreciate capitalism.

I did my calculations based on a 40 hour work week. Glad I'm not the only one who enjoys messing around with this stuff.

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Re: At what age your investments start making more money than you?

Post by Nate79 » Thu Dec 07, 2017 4:51 pm

Thesaints wrote:
Thu Dec 07, 2017 4:07 pm
The beautiful thing about GAAP (or even just AAP) rules is that they are not arbitrary, but descend from rational considerations.
Therefore, when people deviate from them comical consequences often ensue.
Nate79 wrote:
Thu Dec 07, 2017 4:04 pm
Return is only return if you sell. There is no realized income if you don't sell.
I suspect you might be confusing "income" with "taxable income".
I'm not confusing anything. If my assets appreciate in value it is ludicrous to call that personal "income." Unrealized gains are not personal income.

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Re: At what age your investments start making more money than you?

Post by Thesaints » Thu Dec 07, 2017 5:04 pm

What would you say they are ?

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TomatoTomahto
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Re: At what age your investments start making more money than you?

Post by TomatoTomahto » Thu Dec 07, 2017 5:35 pm

TheTimeLord wrote:
Thu Dec 07, 2017 2:58 pm
Tal- wrote:
Thu Dec 07, 2017 2:56 pm
miamivice wrote:
Thu Dec 07, 2017 2:20 pm
Many years ago, I set a personal goal for myself to earn more in dividends per year than a certain high school friend earns in a year at his/her workplace.

My wife is unimpressed with my goal.
Your wife may be unimpressed, but I think that you're my hero...
His wife is my hero, stay in your lane and don't worry about what others are doing.
Yes, don’t count other’s money . . . although if someone has been a real dirtbag for years, you’re excused :D

This year we have had extraordinary returns (Duh!), but DW has had extraordinary increases in her compensation, so I think she’s keeping ahead of the investments.

Question: how do you treat increases in unvested RSUs? If that counts as “investments making money,” then perhaps she crossed the line. IRL, I don’t count them as part of our portfolio.

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House Blend
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Re: At what age your investments start making more money than you?

Post by House Blend » Thu Dec 07, 2017 5:47 pm

CnC wrote:
Thu Dec 07, 2017 2:31 pm
Yea not asking for when it averages more. Just wondering the first time it happened and if it ever was an exciting event.

I realize average growth and actual spending levels matter much more. I just am wondering how often it happens and when it happens for people.
In my experience, this has a lot more to do with which years the stock market chooses to deliver good returns, and a lot less to do with age.

For me, it happened in 2009, 2010, 2012, 2013, and 2016. Roughly a tie in 2014. Came somewhat close in 2003 at 75% of gross.

For 2017, YTD investment returns are at about 2.5 x gross.

You'll notice that all of those were good years for stocks.

The first time around was not that exciting considering that I lost about 2.5 x gross the previous year. The best and worst years often occur near each other.

SQRT
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Re: At what age your investments start making more money than you?

Post by SQRT » Thu Dec 07, 2017 5:49 pm

Given excellent recent market returns, it is quite likely that someone who puts away 10% of his income every year will have a better “market” year than “earning” year after about 10-15 years. Not surprising.

Of course once retired it’s the norm.

Nowizard
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Re: At what age your investments start making more money than you?

Post by Nowizard » Thu Dec 07, 2017 6:14 pm

Our household income since retiring is approximately 1.5X our gross income while working since we were strong savers and have had consistent and successful investing experience. When it first exceeded our gross income is uncertain but well before retirement.

Tim

WhiteMaxima
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Re: At what age your investments start making more money than you?

Post by WhiteMaxima » Thu Dec 07, 2017 6:33 pm

SQRT wrote:
Thu Dec 07, 2017 5:49 pm
Given excellent recent market returns, it is quite likely that someone who puts away 10% of his income every year will have a better “market” year than “earning” year after about 10-15 years. Not surprising.

Of course once retired it’s the norm.
It is just gain on paper. Income is always in the form of cash. Market could change either way.

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ClevrChico
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Re: At what age your investments start making more money than you?

Post by ClevrChico » Thu Dec 07, 2017 6:46 pm

At age 40, comparing net W2 income to net investment income. (If that's fair.)

Another fun exercise is to compute fractions of a McDonald's franchise that investments make.

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Re: At what age your investments start making more money than you?

Post by Gill » Thu Dec 07, 2017 6:53 pm

livesoft wrote:
Thu Dec 07, 2017 2:28 pm
Ha! At what age did you start making LESS money than your investments? I wasn't working at age 18, so it was back then. Savings accounts were paying about 10% to 15%, too.
When was that? I never remember savings accounts paying over 5%

Gill

Thesaints
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Re: At what age your investments start making more money than you?

Post by Thesaints » Thu Dec 07, 2017 6:55 pm

WhiteMaxima wrote:
Thu Dec 07, 2017 6:33 pm
It is just gain on paper. Income is always in the form of cash. Market could change either way.
Let's be serious. According to which accounting rule dividends are income, but reinvested dividends are not ? What if I do cash in dividends and five minutes later decide to use that money to buy more shares ?
Cash only happens to be a financial asset with zero volatility (and it is not the only one!), but otherwise it is not different from anything else with comparable liquidity from the point of view of being considered "income" or not.
Besides, the IRS considers as (taxable) income, even assets with scarce liquidity, as long as one can assess their FMV.
Try to tell them that the stock shares you got as a bonus are not income!

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Re: At what age your investments start making more money than you?

Post by WhiteMaxima » Thu Dec 07, 2017 6:58 pm

Market value could be at loss. Does it count as negative income? For any investment, you have to sell into cash to make the gain. Paper value gain is not income.

livesoft
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Re: At what age your investments start making more money than you?

Post by livesoft » Thu Dec 07, 2017 6:59 pm

Gill wrote:
Thu Dec 07, 2017 6:53 pm
livesoft wrote:
Thu Dec 07, 2017 2:28 pm
Ha! At what age did you start making LESS money than your investments? I wasn't working at age 18, so it was back then. Savings accounts were paying about 10% to 15%, too.
When was that? I never remember savings accounts paying over 5%

Gill
Maybe I am thinking of CDs.
But in high school, my passbook savings account was paying 7%.
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Re: At what age your investments start making more money than you?

Post by triceratop » Thu Dec 07, 2017 7:05 pm

livesoft wrote:
Thu Dec 07, 2017 6:59 pm
Gill wrote:
Thu Dec 07, 2017 6:53 pm
livesoft wrote:
Thu Dec 07, 2017 2:28 pm
Ha! At what age did you start making LESS money than your investments? I wasn't working at age 18, so it was back then. Savings accounts were paying about 10% to 15%, too.
When was that? I never remember savings accounts paying over 5%

Gill
Maybe I am thinking of CDs.
But in high school, my passbook savings account was paying 7%.
The forum committee on definitions recently decided CDs and savings accounts were not investments, as one cannot lose nominal dollars with them.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

livesoft
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Re: At what age your investments start making more money than you?

Post by livesoft » Thu Dec 07, 2017 7:14 pm

^OK, never mind then.
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ram
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Re: At what age your investments start making more money than you?

Post by ram » Thu Dec 07, 2017 7:35 pm

Never. (Currently in our early 50's)
Ram

Chip
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Re: At what age your investments start making more money than you?

Post by Chip » Fri Dec 08, 2017 4:41 am

It happened every single year from 1995 through 1999. I thought I was an investing genius. :D

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Cycle
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Re: At what age your investments start making more money than you?

Post by Cycle » Fri Dec 08, 2017 5:55 am

Projected to be there at 44 in ten years assuming 4% real return and no wage increases. But I suspect that milestone will be meaningless, as are all financial milestones once achieved.

The more interesting milestone to me is when 3 or 4% sawr exceeds spending.

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Cycle
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Re: At what age your investments start making more money than you?

Post by Cycle » Fri Dec 08, 2017 5:55 am

Projected to be there at 44 in ten years assuming 4% real return and no wage increases. But I suspect that milestone will be meaningless, as are all financial milestones once achieved.

The more interesting milestone to me is when 3 or 4% sawr exceeds spending.

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Re: At what age your investments start making more money than you?

Post by AlohaJoe » Fri Dec 08, 2017 6:10 am

Age 39.

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snackdog
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Re: At what age your investments start making more money than you?

Post by snackdog » Fri Dec 08, 2017 6:30 am

With 3% annual salary growth, 50% savings rate and 7% return you can make it in 20 years. 25% savings rate takes about 30 years. 15% = nearly 45 years.

For us it was about 8% annual salary growth and about 15 years.

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Re: At what age your investments start making more money than you?

Post by racy » Fri Dec 08, 2017 7:08 am

43 - 46: portfolio
47 - 50: salary
51 - 55: portfolio
56: salary
57 - 58: portfolio
59: salary
60: portfolio (then retired)

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Re: At what age your investments start making more money than you?

Post by Grt2bOutdoors » Fri Dec 08, 2017 7:37 am

Gross is the wrong bar to set, I am more interested in seeing gains of Xtimes retirement expenses. That plus contributions accelerates the time you need to work before you can voluntarily retire. Example, you need 500k to retire, your portfolio earns gains of $25k and you save $10k. You might only need 10 more years of working before you have enough.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: At what age your investments start making more money than you?

Post by mak1277 » Fri Dec 08, 2017 8:19 am

TomatoTomahto wrote:
Thu Dec 07, 2017 5:35 pm
Question: how do you treat increases in unvested RSUs? If that counts as “investments making money,” then perhaps she crossed the line. IRL, I don’t count them as part of our portfolio.
I don't count unvested equity awards in my net worth. I do, however, count vested but unexercised awards.

DA200
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Re: At what age your investments start making more money than you?

Post by DA200 » Fri Dec 08, 2017 9:18 am

The increase in market value of our investments has outpaced our dual income gross most years since 2012 when we were 44/45. I don't get too excited or concerned with yearly returns vs gross income (except in years when decrease in market value = gross pay...). We just try to keep saving.
However, my wife and I talk/joke about daily changes in market value, such as: "Just lost 6 months pay today" or "You could buy your dream car with market gains today". We are nearing FI.

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Re: At what age your investments start making more money than you?

Post by TomatoTomahto » Fri Dec 08, 2017 10:06 am

DA200 wrote:
Fri Dec 08, 2017 9:18 am
The increase in market value of our investments has outpaced our dual income gross most years since 2012 when we were 44/45. I don't get too excited or concerned with yearly returns vs gross income (except in years when decrease in market value = gross pay...). We just try to keep saving.
However, my wife and I talk/joke about daily changes in market value, such as: "Just lost 6 months pay today" or "You could buy your dream car with market gains today". We are nearing FI.
An old friend of mine was a commodities trader, back when they did it in the pits with open outcry. We often took the train home together, and he'd sometimes remark: "I had a great year today." Other than saying that, his demeanor never gave it away.

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Re: At what age your investments start making more money than you?

Post by CnC » Fri Dec 08, 2017 10:21 am

Grt2bOutdoors wrote:
Fri Dec 08, 2017 7:37 am
Gross is the wrong bar to set, I am more interested in seeing gains of Xtimes retirement expenses. That plus contributions accelerates the time you need to work before you can voluntarily retire. Example, you need 500k to retire, your portfolio earns gains of $25k and you save $10k. You might only need 10 more years of working before you have enough.
As I said gross is the correct bar to set because I am the one doing the measurements.

I understand that gross doesn't matter for long term financial planning expenses matter. But that's not what I am talking about.

I am just looking for when/if investments began earning more than your household. Because that would mean there was some imaginary Mr & Mrs CnC working full time jobs putting value in my portfolio.

This exercise is meant for fun.

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Re: At what age your investments start making more money than you?

Post by Watty » Fri Dec 08, 2017 10:42 am

On the flip side also consider the years when your investments went down by more than your gross income.

For example in 2008 the Vanguard 2015 fund was down by more than 24%. I didn't look it up but that year I that my investments probably dropped by several times my gross income. :twisted:

For icing on the cake that year my home value dropped by about the same amount as my gross income too, and I didn't even live an area where the housing bubble was bad.

This has been a good year for investors but don't get cocky.

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Re: At what age your investments start making more money than you?

Post by Thesaints » Fri Dec 08, 2017 10:46 am

In fact, although the stock market gains on average, peak gains and peak losses are about the same (correct me if I’m wrong; I’m quoting from memory) not only in amplitude, but also in frequency.

That means our investor accumulating assets will begin to experience gains comparable to his job’s income at the same time as he will begin to experience losses of th same magnitude!

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Re: At what age your investments start making more money than you?

Post by smitcat » Fri Dec 08, 2017 10:46 am

CnC wrote:
Fri Dec 08, 2017 10:21 am
Grt2bOutdoors wrote:
Fri Dec 08, 2017 7:37 am
Gross is the wrong bar to set, I am more interested in seeing gains of Xtimes retirement expenses. That plus contributions accelerates the time you need to work before you can voluntarily retire. Example, you need 500k to retire, your portfolio earns gains of $25k and you save $10k. You might only need 10 more years of working before you have enough.
As I said gross is the correct bar to set because I am the one doing the measurements.

I understand that gross doesn't matter for long term financial planning expenses matter. But that's not what I am talking about.

I am just looking for when/if investments began earning more than your household. Because that would mean there was some imaginary Mr & Mrs CnC working full time jobs putting value in my portfolio.

This exercise is meant for fun.

How about another question then....
At what age did you start paying more in taxes than your yearly spending budget?

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Re: At what age your investments start making more money than you?

Post by TheTimeLord » Fri Dec 08, 2017 10:50 am

CnC wrote:
Fri Dec 08, 2017 10:21 am
Grt2bOutdoors wrote:
Fri Dec 08, 2017 7:37 am
Gross is the wrong bar to set, I am more interested in seeing gains of Xtimes retirement expenses. That plus contributions accelerates the time you need to work before you can voluntarily retire. Example, you need 500k to retire, your portfolio earns gains of $25k and you save $10k. You might only need 10 more years of working before you have enough.
As I said gross is the correct bar to set because I am the one doing the measurements.

I understand that gross doesn't matter for long term financial planning expenses matter. But that's not what I am talking about.

I am just looking for when/if investments began earning more than your household. Because that would mean there was some imaginary Mr & Mrs CnC working full time jobs putting value in my portfolio.

This exercise is meant for fun.
It would seem that likely candidates to achieve level regulalry would be people who had very successful investments early (likely not pure indexing), heavy saving middle class workers with a lower income tax burdens and people who have had stagnant or falling wages. Maybe I am an outlier, but I don't see ever achieving this before retirement (partially because I am too old and chicken to have a huge equity allocation), yet looking at various planning resources I should be able to spend more in retirement than I can currently once I account for taxes and tax deferred savings. If I throw in after-tax savings the difference becomes even greater. Honestly I think it is kind of dangerous for someone with a higher equity allocation to look at the results from 2017, 2013 or 2009 and say "Wow I made more from my investments than my job I can quit now". People also need to remember many jobs have benefits that don't show up in the gross of their paycheck like health insurance and 401K matching but will likely be missed as much as their salary if they were to quit.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

CnC
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Re: At what age your investments start making more money than you?

Post by CnC » Fri Dec 08, 2017 11:07 am

TheTimeLord wrote:
Fri Dec 08, 2017 10:50 am
CnC wrote:
Fri Dec 08, 2017 10:21 am
Grt2bOutdoors wrote:
Fri Dec 08, 2017 7:37 am
Gross is the wrong bar to set, I am more interested in seeing gains of Xtimes retirement expenses. That plus contributions accelerates the time you need to work before you can voluntarily retire. Example, you need 500k to retire, your portfolio earns gains of $25k and you save $10k. You might only need 10 more years of working before you have enough.
As I said gross is the correct bar to set because I am the one doing the measurements.

I understand that gross doesn't matter for long term financial planning expenses matter. But that's not what I am talking about.

I am just looking for when/if investments began earning more than your household. Because that would mean there was some imaginary Mr & Mrs CnC working full time jobs putting value in my portfolio.

This exercise is meant for fun.
It would seem that likely candidates to achieve level regulalry would be people who had very successful investments early (likely not pure indexing), heavy saving middle class workers with a lower income tax burdens and people who have had stagnant or falling wages. Maybe I am an outlier, but I don't see ever achieving this before retirement (partially because I am too old and chicken to have a huge equity allocation), yet looking at various planning resources I should be able to spend more in retirement than I can currently once I account for taxes and tax deferred savings. If I throw in after-tax savings the difference becomes even greater. Honestly I think it is kind of dangerous for someone with a higher equity allocation to look at the results from 2017, 2013 or 2009 and say "Wow I made more from my investments than my job I can quit now". People also need to remember many jobs have benefits that don't show up in the gross of their paycheck like health insurance and 401K matching but will likely be missed as much as their salary if they were to quit.
To play devil's advocate here.

To reach a level of investing that the growth surpassed your household gross income there is a very high likelihood that they are investing > 40% of their house income. Thus their growth will likely be much greater that 2x their yearly spending.

Examples of myself in round numbers. Approximately 36% of gross income is expenses the other 64% is tax/investment/savings.

Under typical (average) market returns and constant savings it will be 11 years untill we meet the goal of investments making our gross household income. By that time 4% of investments will be 140% of our current expenses.

So while earning equal to your 100% your income via investments only is not any hard numbers for retirement. You should be Ina good place.

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Re: At what age your investments start making more money than you?

Post by TomatoTomahto » Fri Dec 08, 2017 11:07 am

smitcat wrote:At what age did you start paying more in taxes than your yearly spending budget?
I don’t know the year, but it’s been a while, more due to taxes going up than spending being low :D

My father once told me, very proudly, that he paid more in taxes that year than he had earned two years prior. He always saw the glass as half full.

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Re: At what age your investments start making more money than you?

Post by smitcat » Fri Dec 08, 2017 11:20 am

TomatoTomahto wrote:
Fri Dec 08, 2017 11:07 am
smitcat wrote:At what age did you start paying more in taxes than your yearly spending budget?
I don’t know the year, but it’s been a while, more due to taxes going up than spending being low :D

My father once told me, very proudly, that he paid more in taxes that year than he had earned two years prior. He always saw the glass as half full.
And you are now answering a question where you have much control over both variables and they are easy to collect and compare.

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TheTimeLord
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Re: At what age your investments start making more money than you?

Post by TheTimeLord » Fri Dec 08, 2017 11:24 am

CnC wrote:
Fri Dec 08, 2017 11:07 am
TheTimeLord wrote:
Fri Dec 08, 2017 10:50 am
CnC wrote:
Fri Dec 08, 2017 10:21 am
Grt2bOutdoors wrote:
Fri Dec 08, 2017 7:37 am
Gross is the wrong bar to set, I am more interested in seeing gains of Xtimes retirement expenses. That plus contributions accelerates the time you need to work before you can voluntarily retire. Example, you need 500k to retire, your portfolio earns gains of $25k and you save $10k. You might only need 10 more years of working before you have enough.
As I said gross is the correct bar to set because I am the one doing the measurements.

I understand that gross doesn't matter for long term financial planning expenses matter. But that's not what I am talking about.

I am just looking for when/if investments began earning more than your household. Because that would mean there was some imaginary Mr & Mrs CnC working full time jobs putting value in my portfolio.

This exercise is meant for fun.
It would seem that likely candidates to achieve level regulalry would be people who had very successful investments early (likely not pure indexing), heavy saving middle class workers with a lower income tax burdens and people who have had stagnant or falling wages. Maybe I am an outlier, but I don't see ever achieving this before retirement (partially because I am too old and chicken to have a huge equity allocation), yet looking at various planning resources I should be able to spend more in retirement than I can currently once I account for taxes and tax deferred savings. If I throw in after-tax savings the difference becomes even greater. Honestly I think it is kind of dangerous for someone with a higher equity allocation to look at the results from 2017, 2013 or 2009 and say "Wow I made more from my investments than my job I can quit now". People also need to remember many jobs have benefits that don't show up in the gross of their paycheck like health insurance and 401K matching but will likely be missed as much as their salary if they were to quit.
To play devil's advocate here.

To reach a level of investing that the growth surpassed your household gross income there is a very high likelihood that they are investing > 40% of their house income. Thus their growth will likely be much greater that 2x their yearly spending.


Examples of myself in round numbers. Approximately 36% of gross income is expenses the other 64% is tax/investment/savings.

Under typical (average) market returns and constant savings it will be 11 years untill we meet the goal of investments making our gross household income. By that time 4% of investments will be 140% of our current expenses.
Current expenses, what happened to gross? 140% of 36% puts you at 50.4% of gross and you seem to be assuming no wage growth. In 11 years, hopefully your wages have increased substantially, especially if we are talking about someone in the period from 25-45? Did you buy a house in that period if so your expenses will have spiked or savings reduced or both for the down payment and in all likelihood property taxes add to your tax burden. Lastly, average market returns assumes an AA of 100/0 doesn't it? Feel free to advocate for the appropriateness of this AA for someone in their late 30s/early 40s. I excluded the probable taxable nature of your gains and savings which may reduce their utility significantly if you actually try to use appreciated stock or tax deferred savings to cover expenses.


So while earning equal to your 100% your income via investments only is not any hard numbers for retirement. You should be Ina good place.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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TomatoTomahto
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Re: At what age your investments start making more money than you?

Post by TomatoTomahto » Fri Dec 08, 2017 11:33 am

smitcat wrote:
Fri Dec 08, 2017 11:20 am
And you are now answering a question where you have much control over both variables and they are easy to collect and compare.
I could figure out spending readily enough, but how much we paid in taxes would require going back and looking at tax returns. I don’t track paychecks (for withholding), so it’s not as easy as it seems.

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Re: At what age your investments start making more money than you?

Post by KlingKlang » Fri Dec 08, 2017 11:48 am

Age 44 in 1999. Combination of good year in the markets and being laid off for several months, so not really an exciting event. It did give me some reassurance that we weren't going to starve.
Last edited by KlingKlang on Fri Dec 08, 2017 11:52 am, edited 1 time in total.

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Re: At what age your investments start making more money than you?

Post by CnC » Fri Dec 08, 2017 11:52 am

TheTimeLord wrote:
Fri Dec 08, 2017 11:24 am

...Snip...

To play devil's advocate here.

To reach a level of investing that the growth surpassed your household gross income there is a very high likelihood that they are investing > 40% of their house income. Thus their growth will likely be much greater that 2x their yearly spending.


Examples of myself in round numbers. Approximately 36% of gross income is expenses the other 64% is tax/investment/savings.

Under typical (average) market returns and constant savings it will be 11 years untill we meet the goal of investments making our gross household income. By that time 4% of investments will be 140% of our current expenses.
Current expenses, what happened to gross? 140% of 36% puts you at 50.4% of gross and you seem to be assuming no wage growth. In 11 years, hopefully your wages have increased substantially, especially if we are talking about someone in the period from 25-45? Did you buy a house in that period if so your expenses will have spiked or savings reduced or both for the down payment and in all likelihood property taxes add to your tax burden. Lastly, average market returns assumes an AA of 100/0 doesn't it? Feel free to advocate for the appropriateness of this AA for someone in their late 30s/early 40s. I excluded the probable taxable nature of your gains and savings which may reduce their utility significantly if you actually try to use appreciated stock or tax deferred savings to cover expenses.


So while earning equal to your 100% your income via investments only is not any hard numbers for retirement. You should be Ina good place.


Not sure of your questions meaning.

I'll try to answer.

Current expenses, what happened to gross? 140% of 36% puts you at 50.4% of gross and you seem to be assuming no wage growth. In 11 years, hopefully your wages have increased substantially

That is using the "4% rule" growth should be much higher. But we all know you can't withdraw your entire growth for the year. Yes I'm assuming no wage growth. That's why I said to meet current wages. It will take a total 15 years to surpass our income after wage growth.

Did you buy a house in that period if so your expenses will have spiked or savings reduced or both for the down payment and in all likelihood property taxes add to your tax burden.

Bought a house at 22 paid it off by 28. That is in our past and has already been accounted for with our current savings plan. From 22-32 we have paid off our house and accumulated cash and investments of 2.75 current household gross income.



Lastly, average market returns assumes an AA of 100/0 doesn't it? Feel free to advocate for the appropriateness of this AA for someone in their late 30s/early 40s.

Actually average market returns are based off of vanguard's information. Beginning at 100/0 and slowly transitioning to 70/30 by 45.

https://www.vanguard.com/us/insights/sa ... llocations

Source, of you feel you have better more reliable data than vanguard's historical averages please share with me. I have not found anything as simple and straight forward for returns based on different asset allocations. This is my top best case scenario figure.

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Re: At what age your investments start making more money than you?

Post by lostdog » Fri Dec 08, 2017 12:08 pm

I don't have an answer for an age but I've seen several posts in the past that say 500k is the point where the portfolio starts to take over.
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TheTimeLord
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Re: At what age your investments start making more money than you?

Post by TheTimeLord » Fri Dec 08, 2017 12:09 pm

CnC wrote:
Fri Dec 08, 2017 11:52 am
Actually average market returns are based off of vanguard's information. Beginning at 100/0 and slowly transitioning to 70/30 by 45.

https://www.vanguard.com/us/insights/sa ... llocations

Source, of you feel you have better more reliable data than vanguard's historical averages please share with me. I have not found anything as simple and straight forward for returns based on different asset allocations. This is my top best case scenario figure.
When I hear market returns I think stock market not AA. So which AA were you using for your calculations? So why are you thinking this is not the candidate pool for achieving the level on a regular basis? Perhaps I should have included borderline MMMers too. Just curious since your house i paid off you aren't counting increases in home equity are you, I assume those would be excluded from these sorts of calculations. I do agree you project out a lot more people reaching this level if you assume a 10.1% market return.
It would seem that likely candidates to achieve level regulalry would be people who had very successful investments early (likely not pure indexing), heavy saving middle class workers with a lower income tax burdens and people who have had stagnant or falling wages.
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Re: At what age your investments start making more money than you?

Post by TheTimeLord » Fri Dec 08, 2017 12:11 pm

lostdog wrote:
Fri Dec 08, 2017 12:08 pm
I don't have an answer for an age but I've seen several posts in the past that say 500k is the point where the portfolio starts to take over.
I think some much of this really depends on income, income growth and the amount of tax deferred space someone has available each year to the extent that transfers money from taxes to savings.
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Re: At what age your investments start making more money than you?

Post by KlangFool » Fri Dec 08, 2017 12:13 pm

OP,

1) Hopefully, this year.

2) I am in the 50s.

KlangFool

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Re: At what age your investments start making more money than you?

Post by mnnice » Fri Dec 08, 2017 12:24 pm

I am not sure how much of a milestone it is in this market. My 15 year old has more in his Roth than his lifetime w-2 earnings

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Re: At what age your investments start making more money than you?

Post by wrongfunds » Fri Dec 08, 2017 12:44 pm

mnnice wrote:
Fri Dec 08, 2017 12:24 pm
I am not sure how much of a milestone it is in this market. My 15 year old has more in his Roth than his lifetime w-2 earnings
Very impressive if the money in the Roth IRA came from his w-2 income itself! On the other hand, if you put the money in his Roth, then it is meaningless.

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Re: At what age your investments start making more money than you?

Post by CnC » Fri Dec 08, 2017 12:52 pm

KlangFool wrote:
Fri Dec 08, 2017 12:13 pm
OP,

1) Hopefully, this year.

2) I am in the 50s.

KlangFool
Congrats.

I have been thinking 50's is the reasonable number that can happen. Of course unemployment would make hitting it much less fun but also much easier.

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Re: At what age your investments start making more money than you?

Post by KlangFool » Fri Dec 08, 2017 1:01 pm

CnC wrote:
Fri Dec 08, 2017 12:52 pm
KlangFool wrote:
Fri Dec 08, 2017 12:13 pm
OP,

1) Hopefully, this year.

2) I am in the 50s.

KlangFool
Congrats.

I have been thinking 50's is the reasonable number that can happen. Of course unemployment would make hitting it much less fun but also much easier.
CnC,

<<I have been thinking 50's is the reasonable number that can happen. >>

Not in my case. As a lifetime 30+% gross income saver, I could have reached that milestone in my 40s if and only if I did not gamble on Telecom stock and lost 50% of my asset in the process. This happened about 10+ years ago.

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Re: At what age your investments start making more money than you?

Post by MathWizard » Fri Dec 08, 2017 1:01 pm

It may have happened this year,

For VTSAX:
YTD return 19.96%

but these kinds of gains are unsustainable.
If they were sustainable, I'd could easily quit.

It will never happen if I only assume a 4% return, or even a 7% return (nominal).

I earn more than I spend, so I will be able to meet expenses, but my average year over year
returns will be far lower than my current salary.

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Re: At what age your investments start making more money than you?

Post by A440 » Fri Dec 08, 2017 1:21 pm

Starting around age 46 our portfolio would return more than the take home pay from my modest teaching salary, so long as the average return was 6% or greater.

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Re: At what age your investments start making more money than you?

Post by goodenyou » Fri Dec 08, 2017 4:35 pm

Probably this year. It will be close. 60 (stocks)/30 (bonds) /10 (cash). My wife has a new high-paying job. 52 yo.
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