If you spent $100 on something silly (e.g. new phone, lattes, fast food) how much is that really worth in the future. Thirty years from now what could have you purchased?
Assume you put your money in the stock market with an average 12% annual return. Your money is also growing tax free using compound interest.
In 10 years that $100 would be worth $310
In 20 years that $100 would be worth $964
In 30 years that $100 would be worth $2,995
In 40 years that $100 would be worth $9,305
In 50 years that $100 would be worth $28,900
If you want to calculate what $10 would be in the future just move the decimal to the left one digit. To see what $1,000 would be move the decimal to the right one digit and add a zero.
Devaluation of the Dollar and Inflation
Before we get carried away lets make sure we take into account inflation and the devaluation of the dollar. Using the Bureau of Labor Statatics Calculator we find that the money has much less buying power as it did in the old days. For example:
10 years from now $310 would only be worth $233
20 years from now $964 would only be worth $526
30 years from now $2,995 would only be worth $901
40 years from now $9,305 would only be worth $1,494
50 years from now $28,900 would only be worth $3,855
While it’s next to impossible to predict exactly the rate of inflation in the future these numbers give a ‘ball park’ figure. Using the calculator backwards I entered my compound growth amount in the first box with 2008 as the year. I set the second box back 10, 20, or 50 years. Pressing ‘calculate’ shows what $100 would be worth after inflation adjustments over the select number of years.
Talking about inflation always depresses me. The fact the it could take $28,900 and turn it into $3,855 is just sad. But the good news is that if you grew your investment in a tax sheltered IRA you get to keep every penny of that investment.
Compound Interest Calculator