This is a topic that comes up more than you’d imagine. It’s a human thing. Most of the time it’s because folks are being — folks. For $20K they can get that boat, or kitchen remodel, or new landscaping. The list is nearly endless. The question then arises — since it’s only a measly 20 grand, what’s the big deal? Let’s take a good look.
When you’re just beginning to invest for your retirement, it’s usually not with a million dollar bank account, right?
Throw out the high and low, most of our clients begin with $50-300K in total available capital. 90% of the time it doesn’t come from cash savings either. Assets are borrowed against, (usually the primary residence) and the capital to begin investing is acquired. Let’s say you’re going to begin with around $80K.
If you’re 40 years old and wish to retire between 55 and 60, we’re looking at a 15-20 year investment window.
If you’re taking advantages of market moves, and exchanging when it makes sense, turbo charging your growth whenever prudent, your capital growth rate will remain consistently respectable. Without going through the whole set of boring numbers, $20K invested over that long a period of time will result in what we call in the business — a whole mess a cash.
In the last three decades that $20K, invested over 15-20 years, would have yielded around a million bucks. Really. And if you’re lucky, hitting a few years of abnormally high appreciation rates, that million bucks could happen a lot sooner. It’s not that uncommon.
At retirement the extra million bucks, at just an 8% yield would generate $80,000 a year in retirement income. If you retired at 60, and lived until you were 80…….you get it, right? That’s $1.6Mil in extra retirement income.
Remember, that’s not total retirement income – that’s $80,000 a year additional income. Over a million and a half bucks in your 20 years of retirement.
Or, I guess you could buy that boat, or truck, or whatever it is that’s so important to have this minute. Just remember though — if your retirement lasts 20 years, that boat better have given you $1,600,000 worth of fun.
On the bright side, you never dreamed you’d ever have been able to own a million dollar boat, right?
So — remind me — why were we having this conversation in the first place?
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About BawldGuy
Wow. That really puts things in perspective. I think I’ll opt for an occassional day out on my folks boat instead!
Kelly – That will work just fine, and you get the bonus of having your dad bait your line for you.
By the way, saw your new blog and was pretty impressed. Talk about covering the local scene!
Folks – click on Kelly’s name at the top of her comment and check out her new blog. She’s an agent in South Orange County who obviously knows what she’s talking about over there.
Thanks Kelly – I appreciate you thought very much.
Thanks Peter, I really appreciate that.
People, take a look at Peter’s blog. He’s up in the Walnut Creek area. Click on the text about his quote and wander through his posts.
You won’t be sorry.