Happy You slide question

Hi Jeremy, thanks for making the Happy You slides available; it’s all great stuff. I have a question on monthly investment examples that you used in your Presentation:

-On Slide #4 you mention investing $250/mo. in an SP Index Fund for 40 years will reach a final value of $1,980,563.
-On Slide #7 you state that Amanda invests $800/mo for 40 years but her total net worth is only $2,050,652.

What is the difference in these two investment examples? The monthly investments are very different but the end value is extremely similar.

Any insight would be great as I’m looking to start funding my first TDIF.


Hey Tony! Great question!

WELL, the S&P 500 is the actual results looking backwards. Over history the S&P 500 has returned better than 10% per year, so you get those huge amounts. But also, those are “nominal” values… i.e. the actual numbers and not corrected for inflation. $250 could buy a lot more stuff 40 years ago than it can today.

The $800/month for 40 years uses a projected 7% rate of return. Since the stock market has historically returned about 10% and inflation has historically been about 2-3%, I think using 7% for a forward looking projection is reasonable to get a “real” (inflation adjusted) projection. So that $2,050,652 can be thought of in today’s dollars… You don’t need to also try to figure out what a house will cost in 40 years to wrap your head around what that money is really worth.

Does that make sense?!

Yes, that makes sense. Thanks for taking the time to explain that!

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