My father’s habit of listening to Clark Howard convinced me to snag a few podcasts. The man isn’t so much a financial guru as a commonsense voice. (Things like avoiding pyramid schemes or not using a computer if you’re old.)
He does tend to be thorough, though. Unfortunately, one he breezed over was the oft-repeated tale of how only a few hundred dollars invested early will make you a millionaire.
It goes like this: investing $2k every year from 16 years old to 21, you’ll have a million when you retire even if you don’t invest more. After so much depth in other areas, why is this never expanded to what that million will buy you?
From 1930 to 1970, a dollar became fifty cents; a dollar in 1970 is worth about twenty cents now. The Fed was established to help stabilize currency in 1913. (It’s about as stable as your credit score, right? Zing!)
Wages have stalled for over twenty years (not overall compensation). Degrees are simultaneously more expensive and ubiquitous (decreasing their value?). The cost of living is increasing with resource depletion and soaring health care costs (even with that pathetic “reform”).
The retirement age is likely too low, but returning to work in your mid- to late-seventies is terrible. The cost of declining health is rising exponentially but most live into their eighties.
Our government (to avoid producing a continuous negative budget) routinely uses Social Security funds, so they’re depleted. A much smaller population (work-first mentality; long-overdue gains in female equality) already supports a larger, elder population.
It’s been essentially proven that anyone can be a millionaire. Has it been proven that anyone can live for fifteen years on two hundred grand?
Image courtesy A Cool Friday.