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Comment by Epa095 | Hacker News Reader

Over the last 100 years, the S&P 500 has grown with an average of 6% yearly adjusted for inflation (9.8% nominally).

That means an inflation adjusted doubling every 12 year.

It also means that if you manage to live on e.g 1% of the wealth annually, your wealth will double(inflation adjusted) every 15 year.

So yeah, as long as you don't get too many children (branching factor not more than 4) you 'just' need to get filthy rich, and none of your descendants ever need working.

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The last 100 years has been the era of the American Empire, which is monetized through the network effects of the dollar and dollar-denominated-assets. We don't have ships full of Potosí silver, but we do have 10% yearly S&P returns in an economy growing 3%. Extrapolating another year of that is probably reasonable, extrapolating another 100 years of that is probably not.

Yeah, it's easier to analyse the past than predict the future. I agree that I made a statement about the luxury of wealth the last century.

I don't know if the S&P500 will grow at the same rate the next century, but I am willing to bet a beer that stocks in wide index founds will grow faster than both inflation and average salary for the next century.

I think the realistic number is is more like 2-4% if it’s not supplemented by working (and sometimes even working) I also think when you add in things like paying for private school/ college, divorces, taxes, carrying cost of real estate, etc. luxury travel/clothes/meals/vacations it’s a big number.

I’m not saying it’s not possible, but I suspect the vast majority of grandchildren of a wealthy couple have meaningfully less than the original couple did, as well as less than their parents did.

2-4% of the wealth you mean? That surely depends on the wealth... If you need 200k a year that's 2% of 10 million, but 1% of 20 million.

If you manage 1% then the real value doubles after 15 years. If you need 2% annually, the real value doubles after 18 years. The moral of the story is the same, with enough wealth you can live comfortably while your wealth grows.

The tough part is someone with 20 million "in the bank" will have a hard time constraining themselves to 200k/yr expenses. It seems like a lot but next to 20 million the temptation to spend a little, like 1m on a house, 100k on a car seems like nothing and a potentially reasonable purchase. But it drastically changes the trajectory of that balance.

And you wouldn't feel as good spending 1m on a house or 100k on a car with a 200k salary and zero in the bank.

and the further you get from the actual work that created the nest egg the greater the temptation - because no one treats found money like earned money.

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