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It achieves a most amazing result when the author simply dismisses inflation because Charlotte probably will be able to add to her investments through her adult life. That's great for Charlotte, it means she's earning more than it costs her to live, but I thought we were talking about what we as parents or grandparents can do for Charlotte by contributing $1 each day for 18 years. If I did the math right, if we use the Fed's target rate of 2% inflation, then her $4.2 million at age 65 is worth a little less than $1.2 million in today's terms. Its still not an insignificant sum, but inflation can't simply be dismissed because Charlotte will add to her investments.
My older kids were lucky enough to inherit a bit of money from their great grandmother when they were young and I invested $4000 in PRHSX for my last one on the day she was born. I don't really want my kids to think about those gifts as retirement money, but for whatever they decide I'd hope they've at least had a decent head start.
I have to give a lot of credit for the choice to my wife, because having never made an investment in her life she said she wanted to invest in healthcare. I gave her a list of mutual funds and ETFs that she read about and we discussed and this was the one she chose. So far she's feeling pretty good about her choice!
....but I thought we were talking about what we as parents or grandparents can do for Charlotte by contributing $1 each day for 18 years. If I did the math right, if we use the Fed's target rate of 2% inflation, then her $4.2 million at age 65 is worth a little less than $1.2 million in today's terms. Its still not an insignificant sum, but inflation can't simply be dismissed because Charlotte will add to her investments.
LLJB, appreciate if you will go over the math that you did for your calculation......the step by step calculation you performed, with inputs and output. Thanks!
I always enjoyed Spock's idea of getting rich. Take a penny and double it each day. In less than a month you will have $1 million.
Very nice JohnChisum
From my internet search, looks like if you start with a penny and double it every day, after 30 days you end up with $5,368.709
I'm sure Spock didn't invent that formula but when I saw that Star Trek episode I didn't believe it so I took out paper and pencil. Sure enough on day 27 one hits one million dollars.
Perhaps this correlates with the miracle of compound interest.
@rjb112 PV*(1+r)^n=FV, so I used .02 for r, 65 for n and I rounded the future value from the article to $4.2 million. When I solved for the present value it came out to $1.159 million which I rounded to $1.2 million just to be generous.
@rjb112 PV*(1+r)^n=FV, so I used .02 for r, 65 for n and I rounded the future value from the article to $4.2 million. When I solved for the present value it came out to $1.159 million which I rounded to $1.2 million just to be generous.
@rjb112 Hmmm, I sort of assume one of Excel's built in formulas will work but when I looked quickly at a couple it seemed to me they were built to discount a series of payments to the present. Since its such an easy formula I just did it manually in Excel as =4200000/(1.02^65) and then I did it in reverse, starting with the answer and multiplying by 1.02 sixty five times to make sure I ended up with $4.2 million. Clearly the calculator you used is doing the same thing and with less work for you.
Comments
My older kids were lucky enough to inherit a bit of money from their great grandmother when they were young and I invested $4000 in PRHSX for my last one on the day she was born. I don't really want my kids to think about those gifts as retirement money, but for whatever they decide I'd hope they've at least had a decent head start.
Regards,
Ted
http://www.marketwatch.com/investing/fund/prhsx
From my internet search, looks like if you start with a penny and double it every day, after 30 days you end up with $5,368,709
Perhaps this correlates with the miracle of compound interest.
PV*(1+r)^n=FV, so I used .02 for r, 65 for n and I rounded the future value from the article to $4.2 million. When I solved for the present value it came out to $1.159 million which I rounded to $1.2 million just to be generous.
Did you just plug that Present Value, Future Value formula into Microsoft Excel?
I just plugged this into a purchasing value calculator working backwards, and confirmed your result.
Hmmm, I sort of assume one of Excel's built in formulas will work but when I looked quickly at a couple it seemed to me they were built to discount a series of payments to the present. Since its such an easy formula I just did it manually in Excel as =4200000/(1.02^65) and then I did it in reverse, starting with the answer and multiplying by 1.02 sixty five times to make sure I ended up with $4.2 million. Clearly the calculator you used is doing the same thing and with less work for you.