I debated posting this because it can make you feel hopeless.
But I think the truth is always best found out early.
Many financial gurus talk about investing $100/mo etc to get to a point with $1,000,00 when you retire.
The reality of the math is this - if inflation is 3% per year, that $1,000,000 isn’t worth $1,000,000 today.
Because compounding inflation is just as powerful as compounding returns.
Said differently $1,000,000 in 60 years is only worth $167,000 of today’s buying power with 3% inflation.
And typically w late stage capitalism, rate of inflation increases (not decreases).
So what does this mean in reality?
You have to 6x your goal.
Ex: if you wanted to retire with $1,000,000 and $40,000 per year passive, you actually want $6,000,000 and $240,000 per year passive.
If you wanted $4,000,000 and $200,000 in passive income. You really need your goal to be $24,000,000 and $1,2000,000 in passive income.
Now let’s say inflation is 2.3% rather than 3% (the historical average). Okay. You’ll have overshot your goal by 50% (money will only be 1/4 as valuable rather than 1/6th).
Great. Retire early.
But the alternative is certainly worse. Undershoot and be a burden to the people you care about hoping for social nets which may or may not exist then. Who knows.
Regardless, I’ve never seen anyone talk about this - and maybe it’s because it makes people feel hopeless.
But I figure math is math and you shouldn’t be afraid to do it for yourself.
Always better to overshoot and get there early than never arrive.