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0 tax? Are you investing directly into the stock market? I get taxed on my gains and I invest directly in the stock market. I am not sure how or what you are doing do invest and pay 0 tax.
Having a million in net worth these days might mean nothing more than the fact that you inherited your parents house in the Bay area. My net worth has doubled in two years due only to my home value skyrocketing. I never expected that, mind you, I only wanted a place to live. I had no idea California equity refugees would invade my area and rapidly triple housing prices.
Still, we have a systemic wealth & income inequality problem that no amount of boot-strapping can fix. I've even seen interviews with some of the ultra-wealthy who say they can't stop making money even if they wanted to because the system is skewed in their favor. Not every wealthy person is a fan of the system, ie: Warren Buffett, who has often spoke out against it.
Those are taxed though. When you withdraw its taxed just like any retirement account. In fact from what it seems these IRAs might be taxed more then a long term investor who holds shares of a company.
Also self directed IRA is investments in general, they invest in real estate, metals, and companies right, not just the stock market. They also invest in foreign markets. Taxes on these investments are complicated. And these IRAs face little regulation too and sometimes the investments made can be very unsecure.
I am no expert in IRAs but seems a little sketch and maybe more risky then investing directly in the market.
At current rates of inflation, the federal minimum wage will top $1 million per year in 140 years (less than the amount of time between the invention of the word "millionaire" and today), and it will top $1 million per hour in 400 years. Maybe then we'll finally retire the word "millionaire".
0 tax? Are you investing directly into the stock market? I get taxed on my gains and I invest directly in the stock market. I am not sure how or what you are doing do invest and pay 0 tax.
Capital gains and qualified dividends are taxed at 0% if in the 15% tax bracket, which covers over 90k of income if standard deduction for a couple filing jointly. There is at least $20,500 to work with at 0% tax tier for nonqual dividends and Roth IRA conversions, and depending on income this can be higher due to Retirement Savings Contributions Credit tax credit to offset available to those with modest incomes.
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Originally Posted by plot
I think 8% is high.
If I bought 57k (140k equivalent of 2016) of at&t shares (worth about $5 per share) in 1982 then in 2014 they are worth $33 a share giving me a total worth of 376k of AT&t shares. According to the 8% they return should have been 570k.
If I had bought 18k (140k equivalent) worth of GE stocks in 1962 (0.8 per share) in 1992 it would be worth 146k. But the 8% returns says I should have gotten 180k. If I keep the shares 20 years more then I have 470k worth of shares but the 8% returns suggest that I should have gotten 844k.
If I bought 18k worth of shares of IBM in 1962 then in 1992 it would be worth 96k. But 20 years later I would have 762k worth if IBM shares. This still is not 844k.
Anecdotal experiences aren't relevant, since 1928 the stock market has averaged returns of about 10%. They might be lower or higher going forward, but either way you cannot make a case for 8% being unrealistically high. Bottom line you attempting to compare buying to renting while conveniently leaving out $140k that the renter can grow for 30 years (since buyer had it for a down payment) resulted in a very skewed result.
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Originally Posted by plot
People who probably invested in 2000 or 2001 have probably seen negatives in their portfolio still in 2016. Lot of tech stocks have not recovered from their peek price from 2000 or 2001 all the way into 2016.
I see this chestnut bandied about regularly, and it is absolutely pointless in most analysis. How many people do you know took their net worth from cash and lump summed into the market right at it's peak? I'm sure someone did but that isn't how most people invest, middle class people like in our example would likely be investing regularly over time with annual contributions.
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Originally Posted by plot
I make my living of the stock market and I do not trust the stock market giving me the returns I need tomorrow
Agreed, but in our comparison of buy versus rent we are talking about one person using a down payment of $140k while another lets that money grow for 30 years, which clearly isn't a tomorrow like timeframe.
Of course, there is buying.....and then there is maintaining, which draws a pretty penny in itself.
Many years ago, I was at a business dinner (along with perhaps a dozen other people) with Bob Noyce, co-founder of Fairchild Semiconductor, co-founder of Intel Corporation, inventor of the Integrated Circuit -- and an avid private pilot.
Bob went on about how he was sure his airplane mechanic just couldn't figure out what was wrong with one of his planes, and he was sure the mechanic was ripping him off.
It was just like you or me complaining about getting our cars fixed.
A million dollars isn't much. It's been said one needs 1-2 million for retirement alone. In reality the average working stiff in America will never see that kind of money.
True - but at the same time, any career public servant with a reasonable pension has the retirement income of a multi-million dollar portfolio. The new 1% are public sector employees with gold-plated pensions & Cadillac health care.
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