There’s this myth floating out there in internet comments that “a million dollars isn’t even that much”. The sentiment is partially true: A million dollars isn’t what it used to be. The unrelenting impact of inflation means that a million bucks buys a lot less today than it did 30 years ago. (About half as much actually). But a million is still a lot! And it will still be a lot in 30 more years!

But if you want to combat the impact of inflation, you need to get ahead of it by GROWING your money. Over the last 100 years, inflation has averaged about 3%. That means every year your dollar buys 3% less stuff. If you aren’t GROWING your money by at least 3% per year, you’re actually losing spending power.

How do you grow your money? Well, over the last 100 years an investment in the US stock market has returned an average of about 10%! That’s a lot more than 3%. That means even after the negative impact of inflation, your stock market investment is still growing a net of 7% per year!

That’s why I made the plan I did when I retired with $3M. Some might look at that money as something to spend down to zero. That’s the “$3M won’t get you very far” mentality. Instead, I looked at the $3M as something to GROW. And instead of spending it down, I lived off the “safe withdrawal rate”. The safe withdrawal rate is basically the number you can safely spend of your investments every year and be very unlikely to go broke.

8 years of early retirement later, it’s working for me! I can’t help but have done SOME work, but I haven’t had a jobby job since then. I’ve been living primarily off of my investments. Instead of that $3M going to zero, it’s almost doubled! I expect to be able to live off my investments indefinitely in the future! 🙂

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.

-Jeremy