For the most part, we don’t have a solid measure of our money-making potential. This is especially true because so much of this is dependent on how you earn it. Many have a very low return on investment. A simple calculation of annualized return on investment for the 5 lowest yielding investments in the top 10 percent would look like
$1,000,000 = 0.1% to 0.5% average annual returns
$10,000,000 = 0.25% to 0.5% average annual returns
$25,000,000 = 0.5% to 1% average annual returns
$50,000,000 = 1.1% to 1.5% average annual returns
$75,000,000 = 1.75% to 2.1% average annual returns
$100,000,000 = 2.25% to 2.5% average annual returns
In general, investing based on the assumption that a return is a zero-dollar-yen one is usually a good strategy, though one or two months of $100,000 investing might be a bit much. However, there is a more sophisticated way to look at this that includes inflation in purchasing power. It also includes taxes. It is likely that investing with these assumptions makes a lot more sense than just using our dollars (but we will come back to this one later).
One estimate suggests that, using a “normalized” rate of inflation of 3-2.5 percent, a couple starting on the $1,100,000 investment would be on average earning $10,000,000 just four years from today. (For example, that is equivalent to being $10,000 ahead of your spouse, so you are $20,000 ahead of a 2.5% rate. But to be fair, this assumes you will keep it easy for 4 years, which I’m not sure the average couple gets past in this country. So if the average income doubles over that time, you aren’t going to see any big gains just yet.)
Now you might ask, “How many years?” We’ll come back to this, but it makes more sense to break your retirement up by years, because a lot of how your money should go into your retirement should come from how much you spent on the last 8.5 years.
If you were a 5% earner and spent $1,000,000 over the last 8
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