A Boring Dystopia

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Why aren't we all getting rich from compound interest? (youtu.be)

submitted 20 hours ago by lobut@lemmy.ca to c/aboringdystopia@lemmy.world

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Just let your wealth compound over time and you'll be a millionaire, the advice goes. If this is true why aren't more people rich?UNDERSTAND, SHARE & PUSH BACK

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[–] partial_accumen@lemmy.world 3 points 11 hours ago

I feel like I’m not being clear then: that’s ONLY taking into account the potential interest earned? Touching the principal, you’d be able to go for much longer.

This is the gamble though. The rule of thumb is a 4.7% safe withdraw rate. Once you retire, you've earned all the income from wages you'll ever earn. What money you have saved will have to last you the rest of your life which is an uncertain amount of years with uncertain expenses. You can stack the deck in your favor by doing such things as owning your home outright, but that doesn't shield you from the sky high cost of eventually having to move into an assisted living at today's cost of $6000/month. Who knows how much that will cost in the future? So your $50k/year is completely exhausted by the first week of August having not spent another cent on anything. You'll have to dig into your principle to make up the difference.