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<blockquote data-quote="chev" data-source="post: 129763" data-attributes="member: 6761"><p>You need a better return on investments than %5. At %6 you break even when all is said and done.</p><p></p><p>Inflation.......</p><p><span style="font-family: 'Times New Roman'">For example. Assume you invest $10,000 for 20 years, compounding monthly at 12% per year. Traditional compounding calculations show that you have the staggering sum of $108,925.</span></p><p> <span style="font-family: 'Times New Roman'">However, unless this money is in an IRA or other tax-free vehicle, with zero inflation, you REALLY end up with much less in purchasing power. </span></p><p> <span style="font-family: 'Times New Roman'">For example, with the same numbers above but with an annual tax payment of 30% and 3% inflation, you end up with just $29,252 in real purchasing power terms. In other words. Let's say that you could buy a small car today for $10,000. Save that money for 20 years and you can buy 3 small cars, not 11.</span></p><p> <span style="font-family: 'Times New Roman'">Now try just changing the interest rate to a bank CD rate of 6% per year and the same 30% taxation and 3% inflation. After 20 long years you end up with just over $12,000 in today's money terms.</span></p></blockquote><p></p>
[QUOTE="chev, post: 129763, member: 6761"] You need a better return on investments than %5. At %6 you break even when all is said and done. Inflation....... [FONT=Times New Roman]For example. Assume you invest $10,000 for 20 years, compounding monthly at 12% per year. Traditional compounding calculations show that you have the staggering sum of $108,925.[/FONT] [FONT=Times New Roman]However, unless this money is in an IRA or other tax-free vehicle, with zero inflation, you REALLY end up with much less in purchasing power. [/FONT] [FONT=Times New Roman]For example, with the same numbers above but with an annual tax payment of 30% and 3% inflation, you end up with just $29,252 in real purchasing power terms. In other words. Let's say that you could buy a small car today for $10,000. Save that money for 20 years and you can buy 3 small cars, not 11.[/FONT] [FONT=Times New Roman]Now try just changing the interest rate to a bank CD rate of 6% per year and the same 30% taxation and 3% inflation. After 20 long years you end up with just over $12,000 in today's money terms.[/FONT] [/QUOTE]
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