The above question is actually one of a number of questions you may see on the site. The first is, why would a person want to buy this much stuff? There are a number of reasons, but the most common are:
As you can see on the figure above, many investors will never be able to afford this much money. For many people this is because they are poor. Many will be homeless. Some of those who do save this much money will have no idea how much they have saved, and will in many cases have no idea why they are saving. In fact, it is not clear what they really would have saved if they hadn’t saved.
The question isn’t really one of amount, but of scale. In other words, does anyone want more stuff? The answer to that question is an emphatic no.
If you are able to afford to invest, buying only a minimum of this amount is often not an option. If you have the opportunity, it will be a good investment. If you don’t, it is much more difficult to see a big return. Many investors make the error of overestimating how much they are able to buy, resulting in a large over-investment. There are many ways of saving for financial security, but you need to be realistic.
The biggest thing you need to look at is that for a certain amount of money there is no benefit in investing over what you can get from saving. The cost of investing is usually around twice the cost of savings.
If you look at the above figures, it doesn’t really make sense to retire on 500,000.
This graph shows this: on average a person who works full time at an annual wage of $34,000 will be retired about six years later with a pension of $28,700.
That is $14.25 per year. This $14.25 is the difference between what someone will be paid if they work full time at that wage and what they will be paid if they work all their life at that wage. The actual pension is $28,700, because that works out to be a little over $14.25 per month. So we can estimate the annual pension value of $21,700. This brings the maximum pension that a person can retire with to $24,900 per year.
Of course, all is not perfect, and the actual value of pension depends on the length of time that person has lived. But still
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