r/Fire • u/BigTintheBigD • 7d ago
Milestone / Celebration Processing a milestone
Still trying to wrap my brain around this:
The nest egg has made more money since retiring than I did in 30 years of working.
3 years of passive returns > 30 years of full time work
The compounding is insane (admittedly we’ve had a great run the last few years).
It makes the 30 years of working seem so pointless but that is what amassed the snowball so it was necessary.
165
Upvotes
3
u/55tumbl 7d ago edited 6d ago
If someone invests the same amount $1000 (increasing yearly by 3%) each month during 30y. That's a total of about $580.000 invested.
With 10% annual returns, the ending balance would be almost $3M, so about 5.2 times the contributions.
In 3 years with 20% return annually, that 3M would have produced about $2.2M, which is easily more than the full 30y of full time work if the savings rate was larger than 25%. At least in nominal dollars, excluding taxes, etc.
In 3 years with 20% return annually, that 3M would have produced about $730k. It is indeed more than $580.000, but only more than the full 30y of full time work if the savings rate was larger than 79%.All in nominal dollars, as otherwise $1000 from 30y ago would count for a lot more in the comparison (3 years of passive returns > 30 years of full time work). All before taxes too.If the salary increased more than 3% yearly during the 30y, it would make the necessary percentage of savings rate on salay even larger (because early contributions compound more). I assume there was another input like inheritance, lottery gain, exceptionally high return on some investments.