To: proxy_user
"The book gives the following yardstick for measuring assets: You should have an amount equal to your age times your annual income, divided by 10. So, for example, a 40-year-old couple with $100,000 income should have net worth of $400,000 not including home equity.So this couple was making $100,000 since birth? Or they made a slowly increasing income and yet the formula is based on their most recent income?
If one worked full time from after college at 22yo to 40 they would have to save $22,000 per year. To bank $22,000 at 80's and 90's tax rates they would have had to gross $35,000 per year and bank every penny with zero expenses.
Didn't happen. In the world that I live in everybody has expenses and did not pop out of college in the early 80's making $35,000 per year.
92 posted on
01/04/2004 4:36:55 PM PST by
Eaker
(Place your clothes and weapons where you can find them in the dark. - Lazarus Long)
To: Eaker
Yep. That formula seems to make more sense as people age, but it's terribly inaccurate for young folks. Example: a 25 year old earning 60K would need a net worth of $150K. Assuming this person graduated college at 22 with a net worth of $0, and earned $60K for three years, a net worth of $150K is simply impossible when taxes are considered.
To: Eaker
No, the formula takes that into account. Basically, the money you saved in early years would have been much less, but it would have increased tremendously through compound interest.
I am 50 and didn't start working until I was 26. Although I have never had a six-figure salary, I have more than $1M in financial assets. It can be done.
To: Eaker
So this couple was making $100,000 since birth? Or they made a slowly increasing income and yet the formula is based on their most recent income? If one worked full time from after college at 22yo to 40 they would have to save $22,000 per year. To bank $22,000 at 80's and 90's tax rates they would have had to gross $35,000 per year and bank every penny with zero expenses.Thanks for this analysis, Eaker. Took some of the shock out of it for me!
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