Again, notice the exponential, ski slope-shaped growth, how it starts out growing slowly and
moderately, but then starts to take off. It takes about 25 years to save the first $500,000, but then
it’s only about 6 more years to add another $500,000. At that point, you have $1,000,000, so
with the 10.5% return, your money’s growing at $105,000 per year – and the growth rate will
just keep accelerating. Now it takes only about 4 years to make the next $500,000. By year 45
you have over $4 million, from saving just $400 per month! But, of course, 45 years from now
$4 million won’t be worth what it is today, as inflation will erode its purchasing power, so let’s
look at how much your real wealth, adjusting for inflation, will grow, when consistently
investing $400/month.
The graph below shows how your real wealth grows in inflation adjusted today dollars assuming
a common long term forecast for inflation of 3% per year.