Precious Metals Forum

Go Back   Precious Metals Forum > Precious Metals and Economic News > Fiat Ponzi

Like Tree3Likes
  • 3 Post By benjamen

Reply
 
LinkBack Thread Tools
Old 05-09-2013, 02:29 PM   #1
Super Moderator
 
benjamen's Avatar
 
Join Date: Mar 2012
Location: Migratory
Posts: 1,620
Liked: 685 times
Blowing up stock examples for amusement

I ran across someone pushing the idea of investing purely in the stock market with the following example:

Example:
x: retire in 30 years
y: invest $100,000 up front for ease of example
z: return rate 10% (supposedly the average stock return over the past 25 years)

Basic math do to figure out how much money y dollars will turn into in x years assuming z interest rate:
y*(1+z)^x = $1,744,940

************

I decided to have a little fun and produced a counter example, being very generous with inflation and tax rates:

Example:
x: retire in 30 years
y: invest $100,000 up front for ease of example
z: return rate 10%
t: tax rate of 30%
i: inflation rate of 3%

Basic math do to figure out how much money y dollars will turn into in x years assuming z interest rate:
y*(1+z)^x = $1,744,940

Unfortunately, this is forgeting a tax rate t you pay on withdraw which changes the equation to:
{[y*(1+z)^x]-y*(1-t)}+y = $1,251,458

Next important factor to consider would be inflation rate of i to actually find what the purchasing power of that future cash out will be.. unfortunately, taxes ignore this fact and tax you on the unadjusted numbers:
[{[y*(1+z)^x]-y*(1-t)}+y]*(1-i)^n = $501,844 in real purchasing power



Pass this simple example on to those that love equities
PMBug, bushi and Cronus like this.
__________________
I drive men mad
For love of me,
Easily beaten,
Never free.

PMBug 101 *** Forum Rules

Last edited by benjamen; 05-09-2013 at 02:37 PM. Reason: math recalculated
benjamen is offline   Reply With Quote
Old 05-10-2013, 04:30 AM   #2
Ground Beetle
 
bushi's Avatar
 
Join Date: Nov 2011
Posts: 971
Liked: 554 times
Originally Posted by benjamen View Post:
(...)unfortunately, taxes ignore this fact and tax you on the unadjusted numbers:
...yeah, one would think, that it is just an unfortunate coincidence, that the gov't benefits from inflation on EVERY turn...
Like, it is pushing EVER MORE people, into higher tax brackets over the years (just google what percentage of wage earners have had fit into higher bracket when they have introduced that abomination of "progressive income tax scale", and what percentage of wage earners is it today?), like your example of taxing your savings on non-inflation adjusted basis, etc....

The REAL reason why people do not save today, is that government is giving them EVERY incentive possible, to NOT save. I have figured it out at the age of about 25-27, that saving money makes NO financial sense whatsoever, in today's economy. Was bold, brave, young and reckless, and went on the borrowing spree - mortgage, car, etc. It worked rather well for me, I'd say, in the end (apart from the car loan, of course - worst money sink EVER, never made the same mistake twice - despite "being able to afford it", by popular consensus) - because I was making very good money (relatively), had stable employment, and was paying off my debts quicker than necessary (and truth to be told, I never felt comfortable with debt burdens, so I never went into debt over the top...)

RE: stocks making "all time highs" - funny, even when adjusted for OFFICIAL CPI inflation (let alone the REAL, like shadowstats shows), "all time highs" happened in year 2000, never to be seen again (as of yet)


actually.... IT would be interesting to see, what is the difference in purchasing power, depending on the time when you save x amount of dollars, and if the difference between income tax that you'll pay, if you were to spend it versus put it into the retirement account (if you spend it on, say, PMs - you will pay your full income tax on it, depending on your tax bracket, versus if you put it into retirement account - tax is deferred until you start drawing on your retirement, but what is the tax rate then, AND purchasing power decline?) But, given the difference in purchasing power between now & "30 years later" - I wonder if it is not actually BETTER, to spend all your money, on things that would more likely than not, preserve purchasing power, DESPITE being fully taxed on it - and when is the "threshold year", when it starts to pay off, to put your money into retirement account (because you will still get it tax deferred, and the difference between "today", and say "10 years to retirement" purchasing power, will not drop that much anymore.

...clear as mud explanation, I suppose.... Anyone up for the calculations?
__________________
“...the issue which has swept down the centuries and will have to be fought sooner or later is the People versus the Banks.
Lord Acton

Last edited by bushi; 05-10-2013 at 04:46 AM.
bushi is offline   Reply With Quote
Reply

Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are On


Similar Threads
Thread Thread Starter Forum Replies Last Post
50% stock market if no intervention Penn STS 1 07-15-2012 11:46 PM
The ponzi stock market benjamen Fiat Ponzi 2 07-12-2012 03:21 PM
Stock Market comedy ancona STS 54 12-13-2011 03:06 PM
The stock market was rigged PMBug Fiat Ponzi 3 12-09-2011 08:58 AM


All times are GMT -5. The time now is 04:46 PM.


Powered by vBulletin® from Jelsoft Enterprises Ltd.
Content Relevant URLs by vBSEO 3.6.0 PL2 ©2011, Crawlability, Inc.
Content of PMBug.com copyright © 2011 - 2019 Measuring Up. All Rights Reserved.