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

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

Post by CnC » Thu Dec 07, 2017 1:48 pm

Hey all CnC here and I just had a question for the older more well off Bogle Heads.


How old were you when your investments Grew more in a year than your households 'Gross' income.

We all know that making more money makes it easier to have a larger investment. But, this puts everyone on a more level playing field because it takes a lot less for a truck driver to beat his 60k income for the year than it does for a doctor to beat his 400k a year income.

So community I ask you, at what point did your investments surpass working? It can be a 1 off time in a good market or anything.

Right now we are a ways off since ours is only making 1/4 our household income but I look forward to hearing catching up with me.

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

Post by jlcnuke » Thu Dec 07, 2017 1:52 pm

When my investments start making more money than I do consistently will be either when, or sometime after, I retire in all likelihood. As when the growth of my money surpasses my income, it will also be well surpassing my spending so I'll have no reason to continue working..

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

Post by miamivice » Thu Dec 07, 2017 1:53 pm

I'm at 72% right now, and I'm 38. (That is using my estimate of 8% annual returns rather than the actual returns).

It'll be a while before I see 100% unless our pay goes down for some reason.

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

Post by CnC » Thu Dec 07, 2017 2:03 pm

jlcnuke wrote:
Thu Dec 07, 2017 1:52 pm
When my investments start making more money than I do consistently will be either when, or sometime after, I retire in all likelihood. As when the growth of my money surpasses my income, it will also be well surpassing my spending so I'll have no reason to continue working..
Yea, but if you have 1 million the 4% rule means you can only withdraw 40,000 a year. But if you had 1 million in the sp500 this year you would have made 150,000+


I'm just looking forward to that day and wondering if we will ever hit it or if we will retire before we hit it since we save a large portion of our income.

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

Post by JDCarpenter » Thu Dec 07, 2017 2:06 pm

Boy, it is going to vary a lot... And we never really tracked unrealized or deferred-account gains in that manner.

In our dual income (MD/JD) case, using miamivice's 8% return to filter out boom years, maybe at ages 46/45 when we had lowest nominal income for our post-schooling years due to job change and very slow earnings ramp up? (Due to non-indexing in some accounts, some other years had days in which our investments went up by more than we made in two months, but those were unusual.)

Other than that, and assuming the 8% return, we never made more from our investments than our Gross/real income from jobs. One important factor though: SAHD came back into full-time legal work force for the last 9 years before retirement, which kept our joint earnings each year at more than 8% of our terminal-working net worth.

For us, the more important question was always whether we made more from investments than we wished to spend....

Edited to clarify.
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bottlecap
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Re: At what age your investments start making more money than you?

Post by bottlecap » Thu Dec 07, 2017 2:09 pm

This is a fun thing to think about when you start out, but doesn’t matter. What matters is how much you need to retire.

If you are concerned about your investments making more than you do, you are setting yourself up for disappointment. One year they might, the next they may not and the next they might lose 2x what you’re earning. It’s not a meaningful yardstick.

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

Post by TheTimeLord » Thu Dec 07, 2017 2:12 pm

How old were you when your investments Grew more in a year than your households 'Gross' income.
It might have happened somewhere in the past once or twice but I can't see it happening again until at least one of us retires. Using Gross sets a high bar.
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CnC
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Re: At what age your investments start making more money than you?

Post by CnC » Thu Dec 07, 2017 2:16 pm

bottlecap wrote:
Thu Dec 07, 2017 2:09 pm
This is a fun thing to think about when you start out, but doesn’t matter. What matters is how much you need to retire.

If you are concerned about your investments making more than you do, you are setting yourself up for disappointment. One year they might, the next they may not and the next they might lose 2x what you’re earning. It’s not a meaningful yardstick.

JT
This is pure for fun. It is not a worry or concern. I just remember how excited my wife was when I explained we had a minimum wage worker busy over there at Fidelity working full time putting money into our accounts. (once our growth was greater than 2080 hours X $8.25per hour.

I just was wondering if anyone else tracked when the family account made more than 1 of them and when it made more than both of them.

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

Post by JDCarpenter » Thu Dec 07, 2017 2:16 pm

TheTimeLord wrote:
Thu Dec 07, 2017 2:12 pm
How old were you when your investments Grew more in a year than your households 'Gross' income.
It might have happened somewhere in the past once or twice but I can't see it happening again until at least one of us retires. Using Gross sets a high bar.
+1. This is what allowed us to hit it the one year--although other reasons led to the income reduction. When your income shrinks to well under half of what it was the year before, the portfolio has a better chance!
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miamivice
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Re: At what age your investments start making more money than you?

Post by miamivice » 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.

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

Post by dcabler » Thu Dec 07, 2017 2:26 pm

If you mean when was the first time that happened, then, well, I'm 56 now and it probably happened the first time when I was in my early 40's. But since I invest in stock funds, it's guaranteed that there will years where my investments will make less money than I will at my allocation.

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

Post by TheTimeLord » Thu Dec 07, 2017 2:28 pm

JDCarpenter wrote:
Thu Dec 07, 2017 2:16 pm
TheTimeLord wrote:
Thu Dec 07, 2017 2:12 pm
How old were you when your investments Grew more in a year than your households 'Gross' income.
It might have happened somewhere in the past once or twice but I can't see it happening again until at least one of us retires. Using Gross sets a high bar.
+1. This is what allowed us to hit it the one year--although other reasons led to the income reduction. When your income shrinks to well under half of what it was the year before, the portfolio has a better chance!
The higher effective tax rate with two incomes doesn't make it easier either (I keep meaning to figure out how much my wife's take home would change if I didn't work). That's why I say gross is a high bar. I am not frugal by any definition but once you subtract incomes taxes, tax deferred savings and after tax savings what I use to cover our expenses is well below gross.
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Re: At what age your investments start making more money than you?

Post by livesoft » 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.
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CnC
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Re: At what age your investments start making more money than you?

Post by CnC » Thu Dec 07, 2017 2:31 pm

dcabler wrote:
Thu Dec 07, 2017 2:26 pm
If you mean when was the first time that happened, then, well, I'm 56 now and it probably happened the first time when I was in my early 40's. But since I invest in stock funds, it's guaranteed that there will years where my investments will make less money than I will at my allocation.
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.

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

Post by Kenkat » Thu Dec 07, 2017 2:32 pm

It is interesting that you are asking this because it occurred to me just this year that my portfolio outearned me this year for the first time. I am 53.

p.s. assuming the market doesn’t drop severely in the next 3 weeks since I have posted this...

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

Post by dcabler » Thu Dec 07, 2017 2:35 pm

CnC wrote:
Thu Dec 07, 2017 2:31 pm
dcabler wrote:
Thu Dec 07, 2017 2:26 pm
If you mean when was the first time that happened, then, well, I'm 56 now and it probably happened the first time when I was in my early 40's. But since I invest in stock funds, it's guaranteed that there will years where my investments will make less money than I will at my allocation.
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.
Yep, because I've been tracking for a long time, I remember telling my wife when it happened. I considered it a milestone, but then again I was looking for something I could call a milestone at the time. :-) Then the first 6 figure milestone was cool that we noted. Lately it's been marking when the size of the portfolio crossed the 25-30X annual expenses. If I include the PV of SS, we just reached 30X recently. Feels good. Still working, though.

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

Post by scrabbler1 » Thu Dec 07, 2017 2:37 pm

I compared my total change in investment value (including 401k and company stock) and salary (back in my working years) to see when the former was more than twice the latter. Because my salary contributed to my total investment value, only if the total investment minus salary exceeded salary alone could I make the claim.

This began happening in the middle of 2003, when I was 40 years old. It happened 2 years after I switched from working full-time to part-time, thereby lowering my salary. And in 2003 the markets were strongly rebounding from the 2001-2002 downturn. Also in that time, the value of the company stock I owned really began to skyrocket. Nearly every quarter through the end of 2007 my change in investment value exceeded my salary on a year-ended basis. Then the markets began crashing in 2008, so the salary exceeded investment value again.

When I retired in late 2008, my wages dropped to zero, so my investments have always exceeded my salary.

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

Post by thangngo » Thu Dec 07, 2017 2:45 pm

CnC wrote:
Thu Dec 07, 2017 1:48 pm
Hey all CnC here and I just had a question for the older more well off Bogle Heads.


How old were you when your investments Grew more in a year than your households 'Gross' income.

We all know that making more money makes it easier to have a larger investment. But, this puts everyone on a more level playing field because it takes a lot less for a truck driver to beat his 60k income for the year than it does for a doctor to beat his 400k a year income.

So community I ask you, at what point did your investments surpass working? It can be a 1 off time in a good market or anything.

Right now we are a ways off since ours is only making 1/4 our household income but I look forward to hearing catching up with me.
I hope to see many responses here to compare with my planning. With the latest update to my plan, I will be around 45 when portfolio's growth exceeds my income at that age. I put a lot of assumptions into that estimation (pay raise, promotions, rate of savings, only two kid planned, etc.). I'm about 15 years to the target.

P.S.: I suggest you put in your post that there assumption that you're still employed and earning full time salary & bonus.

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

Post by Tal- » Thu Dec 07, 2017 2:53 pm

I actually think that this is a fun question. I'll take a stab.

At something like age 34, we made more from our investments than we did from our net W2 incomes. I calculated this by figuring our net worth increase minus dollars saved, and compared that to our take home pay after taxes and new dollars saved.

We are 37 today and will just miss making more from our investments than we do from our gross W2 incomes this year. If 2018 returns were identical to 2017 returns, we would make more from our investments than our gross W2 income at age 38. Our gross income is roughly twice our net income due to taxes and savings.

We make an above average income and are heavily invested in real estate. Rentals are a stellar net-worth driver which makes our investment returns look great - especially the last several years. But, they are also volatile, and are expensive and difficult to liquidated. So someone who could generate the same 'investment income to W2 income' ratios that we have, using only traditional investments, may be in a better financial position than we are.
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Re: At what age your investments start making more money than you?

Post by Thesaints » Thu Dec 07, 2017 2:56 pm

Any portfolio that includes a substantial fraction of stocks will grow in spurts. Therefore it can easily exceed your salary in any given year, or completely erase it, as soon as invested capital reaches a value equal to a few times your income.

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

Post by Tal- » 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...
Debt is to personal finance as a knife is to cooking.

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

Post by TheTimeLord » 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.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

mak1277
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Re: At what age your investments start making more money than you?

Post by mak1277 » Thu Dec 07, 2017 3:00 pm

I'm 40 and so far in 2017 my portfolio increases have exceeded my monthly gross income in every month of the year.

p0nyboy
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Re: At what age your investments start making more money than you?

Post by p0nyboy » Thu Dec 07, 2017 3:01 pm

Age 34...this year. My salary is $63,000. As of right now my accounts have grow $95,000.

95,000
- 23,500 (401k/roth ira max)
= 71,500 in gains


Now this has been a crazy year in the stock market and isnt the norm so im not getting too excited...but this is the first time since I started investing in 2006 that this has happened.

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

Post by Thesaints » Thu Dec 07, 2017 3:03 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...
He would be more "heroic" with a goal of exceeding his friend's income with unrealized capital gains, instead of taxable dividends...

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

Post by Texanbybirth » Thu Dec 07, 2017 3:03 pm

They don't make anywhere close to what I make. Maybe when we're 50 or so, if I'm able to stay employed and keep saving?

(Makes me sound like I have a high salary, when really I just have low investment balances.)

Nate79
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Re: At what age your investments start making more money than you?

Post by Nate79 » Thu Dec 07, 2017 3:04 pm

I don't consider capital appreciation as investments making money. Perhaps dividends and interest.

mak1277
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Re: At what age your investments start making more money than you?

Post by mak1277 » Thu Dec 07, 2017 3:06 pm

Nate79 wrote:
Thu Dec 07, 2017 3:04 pm
I don't consider capital appreciation as investments making money. Perhaps dividends and interest.
return is return.

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

Post by Thesaints » Thu Dec 07, 2017 3:07 pm

Nate79 wrote:
Thu Dec 07, 2017 3:04 pm
I don't consider capital appreciation as investments making money.
Tell Warren Buffett and BRK investors.

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

Post by quantAndHold » Thu Dec 07, 2017 3:11 pm

It depends on the year. This year, the market is up bigly, and I only did 4 days of paid work. In 2008, I worked and made money all year, but much of it just got dropped into the hole in the ground that was my investment portfolio at the time.

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

Post by Ice-9 » Thu Dec 07, 2017 3:18 pm

I would bet my salary is not that high ranking among members of this board, so I figured I might have a shot at actually having accomplished this. When I checked, close, but no cigar.

For 2016, my investments' value (less contributions) increased by 85.6% of my gross salary.

Well, maybe one day...

Edit to add: That day won't be at the end of 2017. Through November my investments have made 82.2% of my gross salary so far.
Last edited by Ice-9 on Thu Dec 07, 2017 3:25 pm, edited 1 time in total.

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

Post by marti038 » Thu Dec 07, 2017 3:24 pm

MY income and OUR return will be nearly equal this year (barring a sudden fluctuation or downturn), but as far as our household gross income, it won't be close. I'm 36. My wife is 34.

I'm projecting at a 7.6% average annual return, it will catch up to and pass our gross annual income about the time I turn 56. However, that's based on our current income. I'm kind of hoping we're making more in 25 years than we are now.

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

Post by corn18 » Thu Dec 07, 2017 3:26 pm

This is a tough one as my salary has exploded in the last 5 years. I would need a portfolio well into 7 figures to pull this feat off. Luckily I live way below my means, so the extra salary is quickly moving my FI date to the left.

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

Post by Thesaints » Thu Dec 07, 2017 3:29 pm

Living below one's means can in principle make anybody FI, regardless of their income.
Maybe we should start reasoning in terms of living at/above one's needs to get more meaningful estimates.

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

Post by Bacchus01 » Thu Dec 07, 2017 3:34 pm

It may have happened before, but I think this year is probably the first. Right at about 100% of gross pay, about 225% of net pay.

I'm 44

Using Beardstown math, over the last 6 years including 2017, it has been 82% of gross.

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

Post by WhiteMaxima » Thu Dec 07, 2017 3:37 pm

You mean dividend? I won't count appreciation as income because you haven't sell it yet.

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

Post by Thesaints » Thu Dec 07, 2017 3:38 pm

WhiteMaxima wrote:
Thu Dec 07, 2017 3:37 pm
You mean dividend? I won't count appreciation as income because you haven't sell it yet.
Reinvested dividends shouldn't count either, right ?

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

Post by WhiteMaxima » Thu Dec 07, 2017 3:43 pm

Thesaints wrote:
Thu Dec 07, 2017 3:38 pm
WhiteMaxima wrote:
Thu Dec 07, 2017 3:37 pm
You mean dividend? I won't count appreciation as income because you haven't sell it yet.
Reinvested dividends shouldn't count either, right ?
No it shoudn't. Income is simply cash dividend. let's say AT&T pays 5% dividend each year. If you need 100k income, you would need 2 mil invested in AT&T.

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

Post by ge1 » Thu Dec 07, 2017 3:44 pm

Not going to happen until I retire. High earner and investing conservatively (low need to take risk).

My LTD gains from investing passed my gross income last year.

(corrected typo)

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

Post by abner kravitz » Thu Dec 07, 2017 3:51 pm

Never happened once until I retired.

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

Post by Thesaints » Thu Dec 07, 2017 3:54 pm

WhiteMaxima wrote:
Thu Dec 07, 2017 3:43 pm
No it shoudn't. Income is simply cash dividend. let's say AT&T pays 5% dividend each year. If you need 100k income, you would need 2 mil invested in AT&T.
What if my portfolio pays dividends, but I don't spend them. They should not count either, huh ?

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

Post by mptfan » Thu Dec 07, 2017 4:00 pm

CnC wrote:
Thu Dec 07, 2017 2:31 pm
dcabler wrote:
Thu Dec 07, 2017 2:26 pm
If you mean when was the first time that happened, then, well, I'm 56 now and it probably happened the first time when I was in my early 40's. But since I invest in stock funds, it's guaranteed that there will years where my investments will make less money than I will at my allocation.
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.
Perhaps you have not yet realized that your questions must be vetted and approved by the Boglehead committee-on-vetting-and-approving-acceptable-questions before they will be answered.

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

Post by Nate79 » Thu Dec 07, 2017 4:04 pm

mak1277 wrote:
Thu Dec 07, 2017 3:06 pm
Nate79 wrote:
Thu Dec 07, 2017 3:04 pm
I don't consider capital appreciation as investments making money. Perhaps dividends and interest.
return is return.
Return is only return if you sell. There is no realized income if you don't sell.

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

Post by mffl » Thu Dec 07, 2017 4:06 pm

I was awfully close in 2009 when I was 28, but I'd have to dig up some older documentation to prove it. Jury's still out this year, of course, but I'm awfully close this year as well (age 36).

mak1277
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Re: At what age your investments start making more money than you?

Post by mak1277 » Thu Dec 07, 2017 4:07 pm

Nate79 wrote:
Thu Dec 07, 2017 4:04 pm
mak1277 wrote:
Thu Dec 07, 2017 3:06 pm
Nate79 wrote:
Thu Dec 07, 2017 3:04 pm
I don't consider capital appreciation as investments making money. Perhaps dividends and interest.
return is return.
Return is only return if you sell. There is no realized income if you don't sell.
Fine.

2017 is the first year where my portfolio returns provided a greater portion of my net worth increase than did my wages (gross or net).

Happy?

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

Post by Thesaints » 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".

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

Post by TierArtz » Thu Dec 07, 2017 4:13 pm

Counting unrealized gains, my investment growth has only exceeded family income twice (counting military retirement pay) since 1988 - in 2013 (age 52) and 2017. Looking at gains as percentage of salary is more encouraging. The average of the first five years was less than 2% while the average of the last five years is 70% and the average increase is approximately my base salary and 2X annual expenses :D

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

Post by CnC » Thu Dec 07, 2017 4:18 pm

mptfan wrote:
Thu Dec 07, 2017 4:00 pm
CnC wrote:
Thu Dec 07, 2017 2:31 pm
dcabler wrote:
Thu Dec 07, 2017 2:26 pm
If you mean when was the first time that happened, then, well, I'm 56 now and it probably happened the first time when I was in my early 40's. But since I invest in stock funds, it's guaranteed that there will years where my investments will make less money than I will at my allocation.
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.
Perhaps you have not yet realized that your questions must be vetted and approved by the Boglehead committee-on-vetting-and-approving-acceptable-questions before they will be answered.
:oops:
My bad you are right, I have been around a while now. I should have known that only subjects approved by the "Boglehead committee-on-vetting-and-approving-acceptable-questions"

Silly me trying to have a little fun with the money disappearing out of my check each month.

It is an interesting math game to play. In 10 years our investments should catch our current household salary. But assuming wage growth of 3-4% it will take 25 years because salary grows so much from 30+.

basspond
Posts: 965
Joined: Wed Nov 27, 2013 4:01 am

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

Post by basspond » Thu Dec 07, 2017 4:28 pm

When I was 5 my parents opened a $10 savings account that earned over 5% interest and I had no gross income. In my grownup life it appears in my mid thirties.

Thesaints
Posts: 1308
Joined: Tue Jun 20, 2017 12:25 am

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

Post by Thesaints » Thu Dec 07, 2017 4:32 pm

CnC wrote:
Thu Dec 07, 2017 4:18 pm
In 10 years our investments should catch our current household salary.
Be aware that it can happen in two different ways...

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