Is saving/investing actually a crappy way to get rich?

[Anonymous]

Will investing alone make a middle class person rich? No

It will make them secure and comfortable. Only way to get rich is to own a business - either directly or via a partnership role -- or have a rich family.

You won't have $25M + from dollar cost averaging $1,000/mo..but you will retire comfortably with little stress

[Anonymous]

Anonymous wrote:

Anonymous wrote:Yes, kind of. Ignoring this calculator seems off.

One key factor many people don’t consider is simply earning more money. The average American is limited and if he or she wants to amass a lot of money, he or she has to scrimp and save.

My own parents are worth millions and my father never earned more than 200k in today’s dollars. They didn’t have cleaners, stayed at inexpensive hotels, no yard person, scrimped and saved over the years.

They judge my lifestyle because live large but we also earn close to 800k, which allows us to save around 250k in 401ks and RSUs. Instead of saving more, I’d prefer to focus on earning more.

Wow, I never thought of that. One weird trick...

I think what PP was getting at is that people act like saving money is the way to riches, so they spend all this time figuring out how to save money by planting their own food to lower food costs, living two hours away to save money on housing. In reality, that same effort and time could have been used to better their capability at work, which will lead them to much more money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yes, kind of. Ignoring this calculator seems off.

One key factor many people don’t consider is simply earning more money. The average American is limited and if he or she wants to amass a lot of money, he or she has to scrimp and save.

My own parents are worth millions and my father never earned more than 200k in today’s dollars. They didn’t have cleaners, stayed at inexpensive hotels, no yard person, scrimped and saved over the years.

They judge my lifestyle because live large but we also earn close to 800k, which allows us to save around 250k in 401ks and RSUs. Instead of saving more, I’d prefer to focus on earning more.

Wow, I never thought of that. One weird trick...

I think what PP was getting at is that people act like saving money is the way to riches, so they spend all this time figuring out how to save money by planting their own food to lower food costs, living two hours away to save money on housing. In reality, that same effort and time could have been used to better their capability at work, which will lead them to much more money.

Yes, this.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Wait, you’re saving $100k per year, how many years of that did you put into your calculator?

He said 20 years.

Why do you think OP is a he?

I was going to say the same thing. Its always fascinating (and disappointing) which gender DCUM assumes.

[Anonymous]

Anonymous wrote:OP, I agree that your online calculator is terrible. You can do better with the free planning software that Fidelity offers beginner investors (it’s a Monte Carlo simulation). There are many of these available through financial planning services. I like Smart Asset’s calculators when I do my own wealth planning.

You aren’t calculating compound returns accurately. I’m wondering if your calculator has input assumptions that are overly pessimistic.

We have a lot of reasons to be concerned about future growth, but that’s not happening yet.

It will take a few years of consistent investing before you start to see the effects of compound growth. The last year had been weirdly good so buckle up but be patient and don’t stop investing. Keep it simple now. Total stock market index funds that are low cost are a great way to get going.

Montecarlo simulations are not useful IMO because they unrealistically smooth out returns in a way that does not account for sequence of returns risk accurately. Historically backtested market sims provide a better perspective on the reasonably probable range of outcomes that might occur.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The expectation you can work for 20 years and then not work for 30 or 40 off savings from those 20 is a little ridiculous.

It’s also why saving *anything* in your 20s is highly recommended. And why I plan to give my kids a brokerage account with a couple hundred thousand dollars when they graduate college.

Yeah that's the part that I don't get- first off, when throughout history has that ever been a reasonable expectation for a significant number of people?

Second, how could it possibly be? Who would do the work?

LITERALLY all four sets of our parents retired in their 50's (except one who is basically retired and works a day or so a week). THey are all in or nearing their 80s. So 30+ years of retirement for 8 boomer parents.

[Anonymous]

Anonymous wrote:Will investing alone make a middle class person rich? No

It will make them secure and comfortable. Only way to get rich is to own a business - either directly or via a partnership role -- or have a rich family.

You won't have $25M + from dollar cost averaging $1,000/mo..but you will retire comfortably with little stress

This!

[Anonymous]

Anonymous wrote:I'm 50 and my husband and I have a net worth of $3M and he can retire in 5 years with a government pension. I think we have managed to get pretty rich saving/investing, since we have:
-- a house (owned outright) worth $1M because we bought a small/old starter home, never traded up, refinanced from 7% all the way down to 2.75% as rates went down, made improvements out of our income, and took advantage of appreciation
--a 401(k) worth $1M earned through contributions that I increased from probably $500 or $1000 a year when I started working to the maximum in the last 5-10 years (as kids got older), which have grown
--my spouse's 401(k), which has grown to $1M the same way
--no school debt (law and business school) since we aggressively paid both off in 10 years by not overcommitting to housing costs

He can retire while I still work since we paid off the house, he can collect his pension at 62, we can start 401(k) withdrawals at 65, and wait to 70 to collect SS. We will be pulling down something like $200K a year just in pension, SS, and minimum required withdrawals. Seems like plenty for 2 people.

You are comfortable but not rich.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm 50 and my husband and I have a net worth of $3M and he can retire in 5 years with a government pension. I think we have managed to get pretty rich saving/investing, since we have:
-- a house (owned outright) worth $1M because we bought a small/old starter home, never traded up, refinanced from 7% all the way down to 2.75% as rates went down, made improvements out of our income, and took advantage of appreciation
--a 401(k) worth $1M earned through contributions that I increased from probably $500 or $1000 a year when I started working to the maximum in the last 5-10 years (as kids got older), which have grown
--my spouse's 401(k), which has grown to $1M the same way
--no school debt (law and business school) since we aggressively paid both off in 10 years by not overcommitting to housing costs

He can retire while I still work since we paid off the house, he can collect his pension at 62, we can start 401(k) withdrawals at 65, and wait to 70 to collect SS. We will be pulling down something like $200K a year just in pension, SS, and minimum required withdrawals. Seems like plenty for 2 people.

You are comfortable but not rich.

How much money do you have?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm 50 and my husband and I have a net worth of $3M and he can retire in 5 years with a government pension. I think we have managed to get pretty rich saving/investing, since we have:
-- a house (owned outright) worth $1M because we bought a small/old starter home, never traded up, refinanced from 7% all the way down to 2.75% as rates went down, made improvements out of our income, and took advantage of appreciation
--a 401(k) worth $1M earned through contributions that I increased from probably $500 or $1000 a year when I started working to the maximum in the last 5-10 years (as kids got older), which have grown
--my spouse's 401(k), which has grown to $1M the same way
--no school debt (law and business school) since we aggressively paid both off in 10 years by not overcommitting to housing costs

He can retire while I still work since we paid off the house, he can collect his pension at 62, we can start 401(k) withdrawals at 65, and wait to 70 to collect SS. We will be pulling down something like $200K a year just in pension, SS, and minimum required withdrawals. Seems like plenty for 2 people.

You are comfortable but not rich.

Pp has $2m in 401ks with no other liquidity. If he wants to buy a car, every dollar he takes out is fully taxable. Saying you’re rich is a bit of an overstatement

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yes, kind of. Ignoring this calculator seems off.

One key factor many people don’t consider is simply earning more money. The average American is limited and if he or she wants to amass a lot of money, he or she has to scrimp and save.

My own parents are worth millions and my father never earned more than 200k in today’s dollars. They didn’t have cleaners, stayed at inexpensive hotels, no yard person, scrimped and saved over the years.

They judge my lifestyle because live large but we also earn close to 800k, which allows us to save around 250k in 401ks and RSUs. Instead of saving more, I’d prefer to focus on earning more.

Wow, I never thought of that. One weird trick...

I think what PP was getting at is that people act like saving money is the way to riches, so they spend all this time figuring out how to save money by planting their own food to lower food costs, living two hours away to save money on housing. In reality, that same effort and time could have been used to better their capability at work, which will lead them to much more money.

You both. A good offense (high income) and a good defense (aggressive savings/living beneath your means. We have over $5M at 44, having never earned over $400k.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yes, kind of. Ignoring this calculator seems off.

One key factor many people don’t consider is simply earning more money. The average American is limited and if he or she wants to amass a lot of money, he or she has to scrimp and save.

My own parents are worth millions and my father never earned more than 200k in today’s dollars. They didn’t have cleaners, stayed at inexpensive hotels, no yard person, scrimped and saved over the years.

They judge my lifestyle because live large but we also earn close to 800k, which allows us to save around 250k in 401ks and RSUs. Instead of saving more, I’d prefer to focus on earning more.

Wow, I never thought of that. One weird trick...

I think what PP was getting at is that people act like saving money is the way to riches, so they spend all this time figuring out how to save money by planting their own food to lower food costs, living two hours away to save money on housing. In reality, that same effort and time could have been used to better their capability at work, which will lead them to much more money.

You both. A good offense (high income) and a good defense (aggressive savings/living beneath your means. We have over $5M at 44, having never earned over $400k.

I think you're doing a good job but a 400K income and 5M in wealth are both roughly top 3% in America.

[Anonymous]

Anonymous wrote:

Anonymous wrote:To answer your question: Yes.

Entrepreneurship is the path to riches.

Most entrepreneurs fail. The real answer is winning the genetic lottery or being able to marry into money

Sure, but someone along that line was an entrepreneur most likely. Instead of sucking on an entrepreneurs tit why not just be an entrepreneur yourself?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yes, kind of. Ignoring this calculator seems off.

One key factor many people don’t consider is simply earning more money. The average American is limited and if he or she wants to amass a lot of money, he or she has to scrimp and save.

My own parents are worth millions and my father never earned more than 200k in today’s dollars. They didn’t have cleaners, stayed at inexpensive hotels, no yard person, scrimped and saved over the years.

They judge my lifestyle because live large but we also earn close to 800k, which allows us to save around 250k in 401ks and RSUs. Instead of saving more, I’d prefer to focus on earning more.

Wow, I never thought of that. One weird trick...

I think what PP was getting at is that people act like saving money is the way to riches, so they spend all this time figuring out how to save money by planting their own food to lower food costs, living two hours away to save money on housing. In reality, that same effort and time could have been used to better their capability at work, which will lead them to much more money.

You both. A good offense (high income) and a good defense (aggressive savings/living beneath your means. We have over $5M at 44, having never earned over $400k.

I think you're doing a good job but a 400K income and 5M in wealth are both roughly top 3% in America.

We haven’t earned that income that long. And many posters claim to not be able to even afford college on that income.

[Anonymous]

Anonymous wrote:

Anonymous wrote:If you started from ZERO in your early 30’s that’s a you problem. I knew how compound interest worked in my teens (literally algebra II level math) and started at 0 from 22, hit 1M at 30. That 1M will double 3 times in 30 years to become 8M on its own by the time I’m 60 at 7% inflation adjusted returns.

I bet you were a lot of fun in your 20s…

I actually wasn't even that frugal, still drove an audi, partied, rented with no roommates, later bought a house, traveled to Europe, nice clothes, latest gadgets, etc. No trust fund... just fortunate to work in tech and job hop to a good 200k+ income at 24 that doubled by 30. I'm still poor compared to half the people here.