johnhkc
Recycles dryer sheets
If something costs $10 per month every month on a regular basis over the next 45 years, the total cost is $5,400.
If I add in inflation (I used the CAGR of actual recorded inflation since 1973), it comes to $14,045.74.
But I don't want to pay $14K so I take $2,001.80 and shove it into an investment which grows at 5.773%. This generates the same $10 per month plus inflation over the 45 years.
Thus, $2K today equals $14K in a stream. 7/8 the cost is paid by investment returns and 1/8 is paid by my input.
Does this make sense?
(The 5.773% comes from an inflation-adjusted, recession-adjusted RoR. 9.826% nominal minus 4.053% general inflation = 5.773%)
The nominal rate is the CAGR of a 70/30 investment from 1973 onwards.
If I add in inflation (I used the CAGR of actual recorded inflation since 1973), it comes to $14,045.74.
But I don't want to pay $14K so I take $2,001.80 and shove it into an investment which grows at 5.773%. This generates the same $10 per month plus inflation over the 45 years.
Thus, $2K today equals $14K in a stream. 7/8 the cost is paid by investment returns and 1/8 is paid by my input.
Does this make sense?
(The 5.773% comes from an inflation-adjusted, recession-adjusted RoR. 9.826% nominal minus 4.053% general inflation = 5.773%)
The nominal rate is the CAGR of a 70/30 investment from 1973 onwards.