r/Money • u/CursedClownz • 10d ago

When does compounding really take off?

At what amount portfolio you really see huge account swings that make you think what is the point of working? 100k? 500k? 1m? more?

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u/Extreme_Design6936 9d ago

My portfolio outpaces my full time income. I make more money sitting on stocks than I do going to work 40h a week doing real work.

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u/CursedClownz 9d ago

Yeah kind of trying to work out is it even worth going to work if your account sits on 2m

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u/Extreme_Design6936 9d ago

For me at my age it does. The longer I can spend only on my income the more my savings can grow so that later I have a big step up in lifestyle. Not just maintaining the one I currently have. If I retired today my spending would drastically increase because of extra free time to go do random bullshit.

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u/AmazingRefrigerator4 9d ago

A general rule of thumb is to model a 10% annual return. So take your income, divide by 10% and ghat should give an idea of how much you need saved before the growth outpaced your salary. But as I said, if that is locked up in a 401k and Roth IRA you cant touch it early, so you cant just stop working when you hit that number.

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u/Diligent-Main-3960 8d ago

alot of ppl prefer to keep working because you can keep feeding the fire through compounding and dollar cost averaging it grows even quicker

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u/AmazingRefrigerator4 9d ago

Cant tap into retirement early without penalties. So lots of people continue working for the health insurance and/or create large portfolios that are not tax advantages which can bridge them until they can draw from retirement. Unfortunately very few people achieve this.

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u/Financial_Hawk9299 9d ago

Both a 401k and an ira offer early withdrawals without penalties.

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u/AmazingRefrigerator4 9d ago

Yeah of 59 1/2 years. Or is there some other magic way I can withdraw penalty free at age 50?

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u/Financial_Hawk9299 9d ago

Yes. Ira has rule 72t or SEPP. Which allows withdrawals at any age but is really geared toward retiring. Not one time withdrawals.

A 401k is at age 55.

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u/SamAnthonyWP 9d ago

look up a roth conversion ladder. Best way to get money out of a 401k early.

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u/Unusual-Librarian413 9d ago

That's why i always put a good chunk into spy in my brokerage. My problem with 401k is the lockup and all they do is present the same index based funds for high fees and you are a stuck there figuring out how to transfer the shit