Will an investment of $140,000 be worth $9,300,000 in 45 years?

davidixoye

New member
Hi all,

For this situation, I put the starting amount, P, as 140,000.

The time, N, is 45 (years)

The return rate, R, is 8%

There is also an additional contribution of $1,000 each month during the 45 years.

For some background...

I am 17 years old and a junior in high school. I have a strong interest in construction and electrical. It is a high-paying job already, and with the decrease of blue-collar jobs, will be in severe demand in the future. After completion of high school, most students attend college, and then get a job, and retire. I have absolutely nothing against that, but am very young, and want to ensure I consider all options for my future. One of those options is the following...

After high school, attend a trade school for construction and/or electrical. I will pay around $10,000 for a 1-year course. After that, I will join the workforce and make around $130-150,000 after some years. The first few will obviously be lower until I get a promotion.

The major element of the "background" though is a deal I have with my parents. I am incredibly appreciative of them, and they are very generous. The deal is the following...

There is $150,000 set aside for my post-high school studies, whether that is college, university, or trade school. The only requirement is that I have to successfully graduate. If I go over the $150,000, I am responsible to pay for it all. If I go under the $150,000, I collect the remaining $ and do anything I want with it.

The current option I am looking into is attending trade school right out of high school, then working there for many years, hopefully ranking up and eventually owning my own company. I plan on investing all of the $140,000 (150,000-trade school). I will leave the money in a very conservative long-term fund and let it sit, collecting interest, over the years. When I retire at age 65, I will have been working for 45 years, and the initial $140,000 would be a lot more now. Doing a simple calculation found that if I invested the money for 45 years at an average 8% return, and simultaneously contributed $1,000 per month, the total at age 65 would be an astonishing $9,274,629.89. To some people, that doesn't even seem like that much $. But to me, that is more than I ever know how to spend. I even created a simple spreadsheet to make a super vague future financial plan, and spent around $5,000,000, between luxury housing, cars, a boat, and plenty of vacation, while giving some away. I bought a Rolls Royce, range rover, F-150, Ferrari, Tesla, 2 motorcycles, a $900,000 boat, 2 jet-ski's, a vacation house in St. Thomas, $400,000 in fun spending money for me, a $1.2 million house, $500,000 in bills and taxes, and $200,000 in vacations. So basically I have everything I have ever dreamed of. With these luxuries, I will still have $4,335,000 remaining.

I would like to know if this is truly how easy it is, to let it sit, and work during the time. Is my calculation correct, or have I missed an incredibly important factor here that will disrupt these plans?

I also want to make it clear that I understand there is a 1% chance this will happen how I envision it. I understand that many of the things I have said are subject to change, may not happen at all, etc. The 8% return I selected will almost definitely be wrong since its impossible to predict the market. There is a chance the return will be lower or higher. Maybe I cannot afford $1,000 per month. Maybe I don't truly follow through with the construction studies. Maybe I get arrested, hope not. Maybe I lose everything in a storm. The point is that nothing here is firm whatsoever. I am once again, very young, and want to explore each and every option before I make any eliminations. For this specific situation, please use the figures I have listed.

Is this truly correct? Can I retire and have nearly $10 million?

Thank you all!

P.s

I live in Long Island, New York. So if the numbers seem high, it is because everything costs a load over here.
 
@davidixoye Yes, you calculated that correctly. 7-8% is a fair yearly estimate. All long term saving/investing is pretty simple math. The bigger issue is that we tend to value our current needs over our future ones more. Let’s say 5 years from now you want to get married, you want a house, you want a nice car etc. Are you going to pretend that your investments don’t exist knowing they could make a substantial impact on your physical situation? Are you willing to live cheaply knowing you can live “better”? Most people are not. They will quickly inflate their life to match what they perceive they deserve at that moment. They will spend the money at some point along the way. You can absolutely hit that number, but it requires years of putting off gratification for more opportunities down the road.
 
@nina_m Also, the goal is to maximize the cumulative happiness in life. What's the point of getting $10M at age 65 if you spent most of your life being unfulfilled?
 
@stephanelli My dad died this year at 62 from Covid. My mother-in-law at 52 from cancer. Both were frugal people with lots of savings at the end, and didn't get to enjoy a penny of it.

Life is too be lived. All the money in savings in the world is worth nothing if you aren't around to spend it.
 
@derry Very sorry for your loss. Indeed, the right amount of spending is a tradeoff between enjoying now and enjoying later, where enjoying later comes with more money (if you invest) but also more risk (inflation, you die before then, etc).
 
@derry Sorry for your loss. I have made new figures because I agree. I do not want to live most of my life "cheaply" when I have the $ just sitting there. The new figures are above. Basically, I start with $40k at 20 and every 5 years I collect 50k/100k. At retirement, I still get $4 million or so. Life is too important to save money for 45 years and then spend only some time using it, if lucky enough to get there.
 
@stephanelli It's a valid question: What happens if I die sooner and don't get to have fun with my money? I'll counter with, what if you don't?. If you die early, you still pass along your assets to your family and loved ones and they are taken care of. If you live a long life, but blow all your money, you'll still be working until that fateful day, barely able to take care of yourself without them helping you. You don't want your kids and grandkids forced to take time from their lives to take care of you. It's selfish.
 
@valbass Agreed. So the right answer is somewhere in between. Don't save all the money and live unhappy for decades, and don't blow all your money either. Maximize the expected total discounted happiness you'll enjoy, where you're free to factor in the happiness of your heirs getting their inheritance in calculating your happiness.
 
@davidixoye I think you have a solid plan. Just be certain never to sell your investments if the market drops or your plan won’t work.

You will also need to pay taxes on your reinvested dividends since you can’t put it all in an IRA, be sure to build that into your calculations.

Stay away from individual stocks. Instead buy low cost index funds. My suggestion is to open a Vanguard account and invest in VTSAX and/or VTWAX.
 
@songoflovemetal I would not panic sell. If I put the money in, I will keep it in, unless absolutely needed, or it was part of the plan. How much do you estimate taxes would be on say $4 million, or $9 million?
 
@davidixoye Calculations aside, your mindset and attitude is already setting a wonderful foundation for yourself. Many have comments on the specific ideas, but to even be THINKING about it at your age means great things for your financial stability in your life.
 
@southerngal2 Thank you. I've been working since 13 and investing (with my father) since 12. The fact that I have done that is the best decision I ever made. Now, instead of learning about investing at 20, I have the experience already and feel comfortable putting a large sum at such a young age. I understand the basic principles of saving and investing, and definitely feel it will help me in the future, regarding this scenario or anything else.
 

Similar threads

Back
Top