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Comment by sbov | Hacker News Reader

Note that for $5 million, at 58, assuming he started working at 18, is an average of $125,000 in savings per year between 1949 and 1989. I'm not sure I would call that a normal job. It's far above the median even now, much less back in the 50's, 60's, 70's and 80's.

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While you are correct that it would require pretty above median savings, it wouldn't require anywhere near $125,000 back then. Interest is a very powerful force over 40 years.

From 1949 to 1989, the stock market averaged 7.2% annually. Saving and investing only $20,000 per year for those years would net you about $5m at the end.

$20k was very good money from 1949 into the 1970s.

The BLS CPI calculator puts $20k in 1949 at $198,565.55 today.

he was a lawyer in a small town. Growing up in the great depression, he was extremely frugal for most of his life. Even today he lives in the same modest house he bought 47 years ago and drives a 10 year old cadillac. He also bought a lot of real estate and is a buy and hold stock investor. He wasn't just saving in his piggy bank.

It does make me interested to hear what, if any, investments this person made. Inflation means $5M was worth more in 1949 than in 1989, but investments can (and often do) beat inflation. So, assuming one invests successfully, one could work in 1949 for the 1949 equivalent of today's $125,000, continue on until 1989 with inflation-adjusted pay but no raises, and end up with $5M in 1989. In any case, that would, as you say, be very different from a normal job.

You're forgetting interest so it isn't a straight calculation like above. :)

Even compound interest doesn't work that fast. From some napkin calculations you'd still be starting off packing away like $2-3k/mo from the start of your career at an interest rate of 5% and an inflation of deposits of 3% to pull it off. For reference, the average YEARLY family income in the 60s was in the $5k range.

The stock market averaged about 7% annually during that period (and it was a slow period. the average for most periods is roughly 10% annually).

That still has you packing away about $1k/mo to start with for 10%. Again, that's 2 months or so worth of income for an average person in the 60s.

I'm sure he wasn't putting that much away when he first started, but as he made more, he put away more into his late 30s/40s. There was also a big real estate boom so some of his rental properties probably beat the stock market by a bit during some of that time. Definitely an above average job as well, but not an amazing one. He probably made the equivalent of about 100k today for most of his career (once he was established, not at the start), like many small town lawyers.

That was including growing the deposits at a rate of 2-3%, which ends with approximately $3k/mo at the end.

Anyways, him being a lawyer pretty much answers the issue. You don't usually call any professional job a 'normal job', and that clears it up. It's pretty likely that even then it took some high risk/high reward investments or some lucky real estate buys in the meantime to drive it up that much.

Which is not to disparage the achievement of saving $5mil pre-retirement (or even at retirement) age. It takes above average fiscal discipline and money management to do that even with above average income.

My original point was just that a compound interest savings account isn't that amazing. You have to do more than just sock some money into an account to pull it off.

Buying a modest amount of real estate in parts of California 40 - 50 years ago could very easily get you over $5 million today.

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