HI Bill
Thinks s/he gets paid by the post
- Joined
- Dec 26, 2017
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13, 5, 2, 4 (the 4 would have been a 1 if not for spending in ER)18, 12, 2
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13, 5, 2, 4 (the 4 would have been a 1 if not for spending in ER)18, 12, 2
Anyhow, seemed like a lot of well-to-do parents were financing the Money Mag lifestyle for their adult children. And when I was on my co-op building's board, I got to see first hand just how true that was - at least in NYC. As a landlord, I've also seen how true it is - both situations where you get an inside look at where the money is really coming from.
For those reading this who are just starting out, keep in mind that the average reported timeframe for the first $1M seems to be around 20 years, so don't get discouraged.
Hmm. Or for those reading this thread who never gave saving for retirement much thought beyond participating in 401(k)s to the extent possible. Beginning at age 22 when just out of college, and over the course of various employment situations--none of which offered a matching contribution or spectacular salary increases--my various 401(k)s and rollover IRAs got me to the first 1M a leisurely 32 or 33 years later. Running some numbers on a 401(k) growth calculator, it looks to me like the number of years to reach 1M that people are reporting here are probably below the norm out there in the wild (that is, non-FIRE people).
The power of compounding. But also a million becomes a smaller percentage as your total gets bigger. It is 50% of 2 millions but just 10% of 10 millions.
Yep. As you say, it's simple math - and yet we tout the "the first million is the hardest" line as if it's a piece of valuable inside wisdom!
I mean, if you start with $15,625, you have to double it 6 times to get to a million. Getting from there to 2 million only requires that you double it once. After that, the extra millions come quicker and quicker - provided the draw-down isn't too much of a drag on the compounding, of course!
16 years
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Yes, compounding has power. I mentioned that also in one of my first posts. You are right that first takes years to get because trying to save that amount with some help from compounding. After that one it doesn't take as much effort to achieve more because of compounding power.Late in the game the compounding is what leads to additional millions. Initially it is the saving rate that matters more. And that's why the first million is the hardest.
Every year the portfolio grows by the compounding factor plus the savings factor. When the portfolio is small, so is the compounding amount, so the savings factor exerts more control on how fast the total grows. Later, as the portfolio gets bigger, the compounding amount takes over in importance. Early on (NW=$100,000) a 5% ROI gets you $5,000 per year. If you can save $20k per year, you're quintupling your investment-only rate of growth. Later (NW=$4,000,000) your 5% growth yields $200,000 per year which means the next $million comes in five years even if there is no annual savings set aside.
Late in the game the compounding is what leads to additional millions. Initially it is the saving rate that matters more. And that's why the first million is the hardest.
Every year the portfolio grows by the compounding factor plus the savings factor. When the portfolio is small, so is the compounding amount, so the savings factor exerts more control on how fast the total grows. Later, as the portfolio gets bigger, the compounding amount takes over in importance. Early on (NW=$100,000) a 5% ROI gets you $5,000 per year. If you can save $20k per year, you're quintupling your investment-only rate of growth. Later (NW=$4,000,000) your 5% growth yields $200,000 per year which means the next $million comes in five years even if there is no annual savings set aside.
Yes to everything you said scrinch. I didn't mention the importance of savings in my simplistic post but yes, in the early years, the savings rate is of paramount importance.
It sure is nice when, in later years, you can ease up on the savings rate, eventually stopping altogether, and still make money - and often, lots of it.
I suspect your 32 or 33 years to reach $1M is about the norm for someone who invested solely in a 401k without a matching contribution.
Others here have pointed out that the average poster here got to $1m in 20-22 years. I think hitting $1m that fast would take some investments beyond a 401k, along with max contributions and good company matches for those who had a 401k.
Something else that might be contributing to the longer time frame to acquire the first $1m - Saving for a down payment for a house.
Yes, that is true and for many of us like you stated.Something else that might be contributing to the longer time frame to acquire the first $1m - Saving for a down payment for a house.
In my case I started work in 1974 making $3.25/hr. Very small company savings plan where I saved $4k in 7 years.
But I did buy a vacant lot in 1977 with a mortgage. Saved and paid it off. Sold it and along with savings bought a 5 acre lot in 1982. Used this as collateral for my first house in 1984. Didn't start a 401k until 1986.
So for the first 10 years of work, most of my savings went toward my first house. I suspect that most of us here are not taking $ away from investable assets to buy a house in our most recent years, but rather used whatever savings we had for a house down payment in our early working years.
So while compounding explains most of the reason for increasingly shorter periods to acquire additional millions, most of the early years (at least in my case) savings went into a non investable asset.
Wow I think I've been too conservative with my 60/40, but I got a very late start and didn't want to risk not being able to pull the plug.
Not sure where people are "starting" from (i.e. first investment or first paycheck?) but if my first investment was one troy oz of silver at age 11 it took me 37 yrs for the first million, 4 for the second, still waiting on the 3rd but getting close...
Maybe I should bump up my AA!
Something else that might be contributing to the longer time frame to acquire the first $1m - Saving for a down payment for a house.
In my case I started work in 1974 making $3.25/hr. Very small company savings plan where I saved $4k in 7 years.
But I did buy a vacant lot in 1977 with a mortgage. Saved and paid it off. Sold it and along with savings bought a 5 acre lot in 1982. Used this as collateral for my first house in 1984. Didn't start a 401k until 1986.
So for the first 10 years of work, most of my savings went toward my first house. I suspect that most of us here are not taking $ away from investable assets to buy a house in our most recent years, but rather used whatever savings we had for a house down payment in our early working years.
So while compounding explains most of the reason for increasingly shorter periods to acquire additional millions, most of the early years (at least in my case) savings went into a non investable asset.
Some great success stories!!
luckydude and Onda >>> very impressive!!!
Something else that might be contributing to the longer time frame to acquire the first $1m - Saving for a down payment for a house.