>>Just so that I am clearer on your example, can you define the "upper middle class" salary that you're using in this example?<<
Well here's a simple example that took me all of 3 minutes to generate from scratch using Excel.
I assumed a starting salary of $50K, increasing by 6%/year until $150K was reached, and then increasing by 3%/year for each year thereafter. If that sounds too rich for your tastes, imagine it is a family income.
I also assumed that 5% of the salary was invested each year in some stock index fund, and that the CAGR for the index fund was 10%. If the index fund is broad enough, I think that 10% is probably on the low side.
After 45 years of working, the example gave rise to $3.43M in retirement investments.
If you want to back out inflation, divide by ~1.02^45 to get $1.41M.
O.K. - I haven't assumed any taxes on the index fund, but for an index fund and with as much of the money as possible shielded in IRAs, that might not be a killer.
Of course if you can save more than 5%/year and/or actively manage a portfolio which generates a much greater than 10% CAGR, you can do much better and retire much earlier. (I have!)
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