Estimating Future Wealth (Wealth Potential)

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bigtex
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Estimating Future Wealth (Wealth Potential)

Post by bigtex »

I am just wondering if someone can give me any indication based on a current net worth, income, and age roughly what you could expect for a net worth level later on in life in your 50s, 60s, and 70s? Here are my stats:

Age: 28
Income: $60k, have no idea what my future earnings growth would be. I am not in a managerial role now, and I think I would need this in order to see significant earnings into the six figures.
Net Worth: $250k
Savings Rate: 25% of gross income

Based on these stats, should I easily be a millionaire by 40? by 50? A multimillionaire by 50? by 60?
Strayshot
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Re: Estimating Future Wealth (Wealth Potential)

Post by Strayshot »

Start at 250k, add 15k plus 6% of the total each year for a heavily equities weighted portfolio, figure out where you cross $1M.
smitcat
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Re: Estimating Future Wealth (Wealth Potential)

Post by smitcat »

bigtex wrote: Wed Apr 10, 2019 8:06 am I am just wondering if someone can give me any indication based on a current net worth, income, and age roughly what you could expect for a net worth level later on in life in your 50s, 60s, and 70s? Here are my stats:

Age: 28
Income: $60k, have no idea what my future earnings growth would be. I am not in a managerial role now, and I think I would need this in order to see significant earnings into the six figures.
Net Worth: $250k
Savings Rate: 25% of gross income

Based on these stats, should I easily be a millionaire by 40? by 50? A multimillionaire by 50? by 60?
If you really want to pursue these exercises please keep in mind that $1M will be worth less as the years go out.
We have found that any future forecasting you do is most valuable in today dollars.
Example - 40 years ago (1979) 1 million dollars has the same purchasing power as $3.5 million today.
YMMV
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Raymond
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Re: Estimating Future Wealth (Wealth Potential)

Post by Raymond »

Do you own a house, and if you do, what percentage of your $250,000 net worth is that (subtracting any mortgage, of course)?
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bigtex
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Re: Estimating Future Wealth (Wealth Potential)

Post by bigtex »

Raymond wrote: Wed Apr 10, 2019 8:23 am Do you own a house, and if you do, what percentage of your $250,000 net worth is that (subtracting any mortgage, of course)?
The equity in my home is $130k of the $250k net worth.
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RickBoglehead
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Re: Estimating Future Wealth (Wealth Potential)

Post by RickBoglehead »

Strayshot wrote: Wed Apr 10, 2019 8:10 am Start at 250k, add 15k plus 6% of the total each year for a heavily equities weighted portfolio, figure out where you cross $1M.
This, plus what does being a millionaire do for you?

Since you've posted that your investment assets are only $120k of the $150k, it's going to take a long time to get to $1 million, because the house will most likely not appreciate anywhere near 6% a year.
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bigtex
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Re: Estimating Future Wealth (Wealth Potential)

Post by bigtex »

RickBoglehead wrote: Wed Apr 10, 2019 8:34 am
Strayshot wrote: Wed Apr 10, 2019 8:10 am Start at 250k, add 15k plus 6% of the total each year for a heavily equities weighted portfolio, figure out where you cross $1M.
This, plus what does being a millionaire do for you?

Since you've posted that your investment assets are only $120k of the $150k, it's going to take a long time to get to $1 million, because the house will most likely not appreciate anywhere near 6% a year.
Yes but house is paid off in 10 years which frees up another $1,000 a month towards investing. So then my total savings rate would be 45% of gross.
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Re: Estimating Future Wealth (Wealth Potential)

Post by Sandtrap »

bigtex wrote: Wed Apr 10, 2019 8:06 am I am just wondering if someone can give me any indication based on a current net worth, income, and age roughly what you could expect for a net worth level later on in life in your 50s, 60s, and 70s? Here are my stats:

Age: 28
Income: $60k, have no idea what my future earnings growth would be. I am not in a managerial role now, and I think I would need this in order to see significant earnings into the six figures.
Net Worth: $250k
Savings Rate: 25% of gross income

Based on these stats, should I easily There is no "easily" in "wealth" most of the time. be a millionaire by 40? by 50? A multimillionaire by 50? by 60?
There are a lot of scenarios, most effected by what cannot be put on a spreadsheet.
Realize that the farther the projection, the more variables and "surprises" (personal and financial black swans) arise.

Possible Scenario 1:
Net Worth and why.
Age 28 = 250k
Age 32 = 400k (promotion, life is stable, career is stable)
Age 50 = 500k (marriage, divorce, recession, correction, career change, position change, company change, children)
Age 60 = 1.5 mil. (almost FIRE, continuation of previous factors)
Age 70 = 1.8 mil. (Pension, SS, 401k, etc. No longer pay child support, alimony. Market has been good. Downsize home. Move HCOL to LCOL. Happily Retired with reasonable expectations.

Possible Scenario 2
?
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RickBoglehead
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Re: Estimating Future Wealth (Wealth Potential)

Post by RickBoglehead »

bigtex wrote: Wed Apr 10, 2019 8:36 am
RickBoglehead wrote: Wed Apr 10, 2019 8:34 am
Strayshot wrote: Wed Apr 10, 2019 8:10 am Start at 250k, add 15k plus 6% of the total each year for a heavily equities weighted portfolio, figure out where you cross $1M.
This, plus what does being a millionaire do for you?

Since you've posted that your investment assets are only $120k of the $150k, it's going to take a long time to get to $1 million, because the house will most likely not appreciate anywhere near 6% a year.
Yes but house is paid off in 10 years which frees up another $1,000 a month towards investing. So then my total savings rate would be 45% of gross.
No it won't, because you're not accounting for your spending being higher in 10 years. Taxes goes up, food goes up, etc. And you didn't supply that info in your original post.

1/2 hour and Excel should give you your answer in a few different scenarios.
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3-20Characters
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Re: Estimating Future Wealth (Wealth Potential)

Post by 3-20Characters »

As someone who’s 61 and did this at your age, I say forget this exercise because these estimations are worthless. Life will happen. Are you going to have a family? What will your health be like? What might happen to our political and economic systems? What sort of career disruptions will you experience from new tech? Etc...

I’d say you’re doing fine. You’re saving money and have a positive net worth. That’s better than many at your age with that salary. Continue on. Focus on living a fulfilling life and think about increasing your human capital for the money side of things.
bluebolt
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Re: Estimating Future Wealth (Wealth Potential)

Post by bluebolt »

dinkytown.net has lots of savings/investment calculators. You can try this one for what you're trying to forecast:

https://www.dinkytown.net/java/investme ... lator.html
pdavi21
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Re: Estimating Future Wealth (Wealth Potential)

Post by pdavi21 »

Probably 40 or 50 if you don't quit early or catch lifestyle creep.
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Laika
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Re: Estimating Future Wealth (Wealth Potential)

Post by Laika »

I've maintained spreadsheet predictions of my long-term future wealth on and off over the last 30 years.

It can be an interesting exercise, but I've long-since concluded that it's futile for two reasons: The first is that too much of the unexpected happens along the way for long-term predictions to be useful; long term predictions are simply going to be inaccurate beyond first-order guesses. The second is that my own sense of the value of the predictions (e.g., how much is "enough") have also turned out to be quite inaccurate. So not only the predictions, but their value too, have always turned out to be inaccurate.

I don't try anymore, except for tracking the usual safe withdrawal rate stuff. That said, to first order, i.e., "will I have $100k, $1MM or $10MM by age X?", it can still provide some insight, but don't put a lot of faith in more than the first significant digit. (From what I can see, you should be OK.)
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Re: Estimating Future Wealth (Wealth Potential)

Post by bluebolt »

Laika wrote: Wed Apr 10, 2019 7:57 pm I've maintained spreadsheet predictions of my long-term future wealth on and off over the last 30 years.

It can be an interesting exercise, but I've long-since concluded that it's futile for two reasons: The first is that too much of the unexpected happens along the way for long-term predictions to be useful; long term predictions are simply going to be inaccurate beyond first-order guesses. The second is that my own sense of the value of the predictions (e.g., how much is "enough") have also turned out to be quite inaccurate. So not only the predictions, but their value too, have always turned out to be inaccurate.

I don't try anymore, except for tracking the usual safe withdrawal rate stuff. That said, to first order, i.e., "will I have $100k, $1MM or $10MM by age X?", it can still provide some insight, but don't put a lot of faith in more than the first significant digit. (From what I can see, you should be OK.)
I agree to a point. However, I do find it to be a useful exercise since I can adjust my plans as the situation and my goal changes.
sixty40
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Re: Estimating Future Wealth (Wealth Potential)

Post by sixty40 »

bigtex wrote: Wed Apr 10, 2019 8:06 am I am just wondering if someone can give me any indication based on a current net worth, income, and age roughly what you could expect for a net worth level later on in life in your 50s, 60s, and 70s? Here are my stats:

Age: 28
Income: $60k, have no idea what my future earnings growth would be. I am not in a managerial role now, and I think I would need this in order to see significant earnings into the six figures.
Net Worth: $250k
Savings Rate: 25% of gross income

Based on these stats, should I easily be a millionaire by 40? by 50? A multimillionaire by 50? by 60?
Using your data, $250k current net worth, $15k contribution/yr at end of each yr, using a 60/40 stock/bond portfolio based on avg historical return of 8.80% per Vanguard:
- at 40 = $986,400
- at 50 = $2,518,000
- at 60 = $6,029,000
sjt
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Re: Estimating Future Wealth (Wealth Potential)

Post by sjt »

sixty40 wrote: Thu Apr 11, 2019 9:41 am
Using your data, $250k current net worth, $15k contribution/yr at end of each yr, using a 60/40 stock/bond portfolio based on avg historical return of 8.80% per Vanguard:
- at 40 = $986,400
- at 50 = $2,518,000
- at 60 = $6,029,000
This is a good way to look at things, but I think you should use a more conservative return rate and also adjust for inflation.
"The one who covets is the poorer man, | For he would have that which he never can; | But he who doesn't have and doesn't crave | Is rich, though you may hold him but a knave." - Wife of Bath tale
sixty40
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Re: Estimating Future Wealth (Wealth Potential)

Post by sixty40 »

sjt wrote: Thu Apr 11, 2019 10:06 am
sixty40 wrote: Thu Apr 11, 2019 9:41 am
Using your data, $250k current net worth, $15k contribution/yr at end of each yr, using a 60/40 stock/bond portfolio based on avg historical return of 8.80% per Vanguard:
- at 40 = $986,400
- at 50 = $2,518,000
- at 60 = $6,029,000
This is a good way to look at things, but I think you should use a more conservative return rate and also adjust for inflation.
I was thinking the OP is just looking for a very simplified rule-of-thumb kind of response, just based on the simple information provided. Yes inflation, different contribution amounts, life changes, a different ROR, etc. will definitely affect the outcome. Just for the sake of discussion, the same criteria with a ROR of 6.0% yields; $771.3k (40 yrs old), $1590.8k (50 yrs old), $3058.5k (60 yrs old) respectively.
jminv
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Re: Estimating Future Wealth (Wealth Potential)

Post by jminv »

When you do this, be very conservative with your expectations for future long run returns since overoptimism will likely lead you to save less.

Google 'future value calculator' and look for one that lets you add periodic deposits. Use a conservative rate of return for the long run. You can vary it and come up with some projections of what your net worth could look like if the assumptions hold true. Under the default assumption that the return is 6%, your starting balance is 250k, and your annual deposit is 15k, you would have 3 million at age 60.
smitcat
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Re: Estimating Future Wealth (Wealth Potential)

Post by smitcat »

sixty40 wrote: Thu Apr 11, 2019 9:41 am
bigtex wrote: Wed Apr 10, 2019 8:06 am I am just wondering if someone can give me any indication based on a current net worth, income, and age roughly what you could expect for a net worth level later on in life in your 50s, 60s, and 70s? Here are my stats:

Age: 28
Income: $60k, have no idea what my future earnings growth would be. I am not in a managerial role now, and I think I would need this in order to see significant earnings into the six figures.
Net Worth: $250k
Savings Rate: 25% of gross income

Based on these stats, should I easily be a millionaire by 40? by 50? A multimillionaire by 50? by 60?
Using your data, $250k current net worth, $15k contribution/yr at end of each yr, using a 60/40 stock/bond portfolio based on avg historical return of 8.80% per Vanguard:
- at 40 = $986,400
- at 50 = $2,518,000
- at 60 = $6,029,000
"at 60 = $6,029,000"
And at 60 years of age that $6 million might have the purchasing power of $2 Million today.
seligsoj
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Re: Estimating Future Wealth (Wealth Potential)

Post by seligsoj »

I did this exercise when I was in my 20s to calculate when I would make my first million and it was helpful and fun. I have a spreadsheet that projects out to my 60s and I check it once a year to see whether I am at, above or below my projections. I used the website money chimp to play around with the variables. I predicted I would reach a million in investments by 40....I am now 41 and will probably get there by 43, if things continue on the same trajectory. I did reach a total net-worth of a million by 40. I got lucky in that things stayed stable for my spouse and I with our marriage, health of our family, and employment.....any issues in any of these areas would have blown up my projections (and could still decimate networth were they to occur)
fourkids
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Re: Estimating Future Wealth (Wealth Potential)

Post by fourkids »

your future career growth is the biggest determinant to your future wealth. Don't waste time on other futile exercises.
work hard, get promoted, seek bigger opportunities, pursue more education as needed.
at age 50, if you make $900,000, you'll be much better off than if you made $100,000.
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