Interesting Real Estate Increases

[jeffk]

Here’s a scenario.
Assume a person has finished a 4-year college education at age 22 and starts a job at $35,000 a year.
Assume they were reasonably smart and didn’t go to a ridiculously expensive college and max out their student loans. Assume they probably got some state and federal aid. Assume they worked to offset their expenses. I.E. Assume any school loans are manageable.
Assume their salary increases 1% a year.
Assume they set aside 10% of their salary for retirement (beyond SS) in a tax sheltered account. (If their salary increases faster, so does their retirement savings.)
Assume the investment growth rate is 5% throughout their working and retirement lives. Hint: CDs will not work. You must go into the market. However a 5% average return is a reasonable expectation without excessive risk.

At age 68, retirement, they will have a salary of ~$54,000 and retirement savings of ~$650,000.
They could take out ~$42,000 a year (75% of their ending salary) for 30 years, till age 98. (Still 5% growth of their investment account balance.)
Note, they would also get SS.
Yes, inflation would nibble at the value of their retirement payouts but, besides medical expenses, your costs tend to decline as you age. You don’t have a mortgage, you aren’t traveling as much, you aren’t driving as much, etc. They may also get a higher rate of growth. All of this is unknowable.

The simple formula is to save 10% of your working earnings and expect 5% growth of your investments.
Is it easy? Of course not. It requires a discipline that most people lack.
If you are unhappy with your standard of living you have two basic options, work more hours/multiple jobs, OR advance your education and accept higher levels of job responsibility. The latter is best but, frankly, not everyone is capable of that.
In addition, the “I want it NOW” mentality is fatally toxic to disciplined savings. My neighbor just got a new car, put an addition on their house, got their yard landscaped, took the family for a European vacation, and my credit card is BURNING A HOLE IN MY POCKET can obliterate a savings plan. If you can earn well above your retirement planning and budget requirements, pay for it in cash, NOT credit. Otherwise, NOT now.

I know a lot of people can pick holes in these ideas and but, but, but it into pieces. Some people face special challenges that make it impossible to do do these things. However, if most people did this it would work for them. It’s not rocket science. It’s just hard and disciplined work. AND, even if it didn't work out exactly as planned, you would still be better off than if you did nothing.

[Descant]

A couple of simple options to start retirement savings-that $300/month in one of the examples above.
1. Buy used cars and pay cash. My college roommate had an old Buick that burned a lot of oil (400,000 miles) so he got used oil for free every time he filled up. If you don't drive a POS for a year in your younger days you're missing a lot of good stories. You're also buying comprehensive and collision insurance coverage that you don't need. Cars can be unnecessarily expensive. He was also investing in stocks in those days.
2. Join the military. Long list of options here. Trade training, ROTC, GI Bill. After active duty, I stayed in the reserves for. One weekend a month was worth a few hundred dollars, plus pay for summer cruise, and you could buy stuff cheap at the base exchange/commissary. A drill was 4 hours, so it was often possible to go in for an afternoon or evening to do extra planning or evaluation of previous events. Stick it out (with your buddies) for 20 years and get a pension.

[Juiced06GTO]

The beginning of your scenario is exactly where I started out after college. 22 w a 35k a year job, about 18k in college loan debt and a bad car addiction haha! I made some mistakes back then, like buying a new car, building and racing it and spending money I didn't have and put nothing into retirement.

Through some helpful advice from my then boss and a check to my crazy spending from my now wife, I reigned myself in and and actually started planning for the future.

Now 37, at the same company I was at when I was 22, I've managed to clean up that mess through advancement, hard work, and more discipline with spending/saving. I haven't been able to kick the car addiction though...

Originally Posted by jeffk

Here’s a scenario.
Assume a person has finished a 4-year college education at age 22 and starts a job at $35,000 a year.
Assume they were reasonably smart and didn’t go to a ridiculously expensive college and max out their student loans. Assume they probably got some state and federal aid. Assume they worked to offset their expenses. I.E. Assume any school loans are manageable.
Assume their salary increases 1% a year.
Assume they set aside 10% of their salary for retirement (beyond SS) in a tax sheltered account. (If their salary increases faster, so does their retirement savings.)
Assume the investment growth rate is 5% throughout their working and retirement lives. Hint: CDs will not work. You must go into the market. However a 5% average return is a reasonable expectation without excessive risk.

At age 68, retirement, they will have a salary of ~$54,000 and retirement savings of ~$650,000.
They could take out ~$42,000 a year (75% of their ending salary) for 30 years, till age 98. (Still 5% growth of their investment account balance.)
Note, they would also get SS.
Yes, inflation would nibble at the value of their retirement payouts but, besides medical expenses, your costs tend to decline as you age. You don’t have a mortgage, you aren’t traveling as much, you aren’t driving as much, etc. They may also get a higher rate of growth. All of this is unknowable.

The simple formula is to save 10% of your working earnings and expect 5% growth of your investments.
Is it easy? Of course not. It requires a discipline that most people lack.
If you are unhappy with your standard of living you have two basic options, work more hours/multiple jobs, OR advance your education and accept higher levels of job responsibility. The latter is best but, frankly, not everyone is capable of that.
In addition, the “I want it NOW” mentality is fatally toxic to disciplined savings. My neighbor just got a new car, put an addition on their house, got their yard landscaped, took the family for a European vacation, and my credit card is BURNING A HOLE IN MY POCKET can obliterate a savings plan. If you can earn well above your retirement planning and budget requirements, pay for it in cash, NOT credit. Otherwise, NOT now.

I know a lot of people can pick holes in these ideas and but, but, but it into pieces. Some people face special challenges that make it impossible to do do these things. However, if most people did this it would work for them. It’s not rocket science. It’s just hard and disciplined work. AND, even if it didn't work out exactly as planned, you would still be better off than if you did nothing.

[Biggd]

I hope you have a chance to own classic GTO some day. Those are money in the bank.

Originally Posted by Juiced06GTO

The beginning of your scenario is exactly where I started out after college. 22 w a 35k a year job, about 18k in college loan debt and a bad car addiction haha! I made some mistakes back then, like buying a new car, building and racing it and spending money I didn't have and put nothing into retirement.

Through some helpful advice from my then boss and a check to my crazy spending from my now wife, I reigned myself in and and actually started planning for the future.

Now 37, at the same company I was at when I was 22, I've managed to clean up that mess through advancement, hard work, and more discipline with spending/saving. I haven't been able to kick the car addiction though...

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[WinnisquamZ]

Originally Posted by Biggd

I hope you have a chance to own classic GTO some day. Those are money in the bank.

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15k for a SL500 or 50K for a true GTO. Neither is a everyday driver so your maintenance costs are minimal. And if you own either you need to wrench. Will always love the SL500. Low miles and single owners are important


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[Biggd]

I never had the urge to own a Mercedes at any price. I'm not a fan of German cars.

Originally Posted by WinnisquamZ

15k for a SL500 or 50K for a true GTO. Neither is a everyday driver so your maintenance costs are minimal. And if you own either you need to wrench. Will always love the SL500. Low miles and single owners are important


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[TheTimeTraveler]

I stick with the Japanese cars; Honda, Toyota, Subaru, etc. Just drive them and change the oil. Add gas once in a while.

Easy to maintain and inexpensive to operate. We taught them well after WWII.



.

[ApS]

Originally Posted by Biggd

I never had the urge to own a Mercedes at any price. I'm not a fan of German cars.

The Mercedes 600 is elegant, the 190D—back in its day—was a solid buy.

Some of the SE and SL models—and 1950s convertibles have me pining for one.

But the best-handling Mercedes should get everyone's attention!

[Biggd]

Originally Posted by ApS

The Mercedes 600 is elegant, the 190D—back in its day—was a solid buy.

Some of the SE and SL models—and 1950s convertibles have me pining for one.

But the best-handling Mercedes should get everyone's attention!

That nose is frugly!

[ishoot308]

Originally Posted by Biggd

I hope you have a chance to own classic GTO some day. Those are money in the bank.

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1966 GTO is my favorite classic muscle car!! What a beauty!!

Dan

[Biggd]

I agree! Went to look at one a couple years ago for sale, black 66 conv with a late model LS motor and 6sp trans. Awesome car but he wanted 60K. A little too rich for my blood.

Originally Posted by ishoot308

1966 GTO is my favorite classic muscle car!! What a beauty!!

Dan

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[Garcia]

Originally Posted by ishoot308

1966 GTO is my favorite classic muscle car!! What a beauty!!

Dan

Back in high school in the mid 80's a friend had a black 66 GTO - awesome car. He's wishing he kept it

[Descant]

I guess we all had cars we wanted in HS, and if we had access, they would be worth a lot of money today. My fraternity brother had a GTO convertible. He joined the Navy and became a pilot. Last reunion he was a four stripe Captain and a pilot with 600 traps. Join the Navy and pick your thrills. I rode an ejection seat once--hot cars are fun, but there is no place like the US Navy for real thrill rides.

[Biggd]

Originally Posted by Garcia

Back in high school in the mid 80's a friend had a black 66 GTO - awesome car. He's wishing he kept it

I've had sooo many cars in my day but I never owned a GTO. I always wanted a 66 or 67 but prices are too high now.
I had a few Grand Prix's back in the day, a wolf in sheep's clothing.

[Juiced06GTO]

I am in the process of building this at home. One day I'll get a nice 66 to park next to my 06 in there...