Re:The Rate of Return on Everything, 1870–2015 [pdf]
by Dylan16807 on Monday May 06, 2019 @08:11AM
(#19838638)
Let's set up a situation where r is greater than g, and also I'm getting a fair share of g so I can actually experience this tradeoff properly.
Okay, so the rational behavior is for me to do the minimum amount of work possible for most of my life, since wages grow faster than savings. Then, the week before retirement, I just have to do 10 years of work all at once!
Doesn't really work.
If g is one percentage point bigger than r it makes my retirement savings somewhat smaller than I'd like, but it's still far better than not having any.
If I already have lots of money, and I don't want to go bankrupt, my only real options are r and leaving it in a box. And r definitely has better results than the box.
Preemptively buying products I don't want yet has an even worse return than the box, since they need to be stored and decay over time.
Okay, so the rational behavior is for me to do the minimum amount of work possible for most of my life, since wages grow faster than savings. Then, the week before retirement, I just have to do 10 years of work all at once!
Doesn't really work.
If g is one percentage point bigger than r it makes my retirement savings somewhat smaller than I'd like, but it's still far better than not having any.
If I already have lots of money, and I don't want to go bankrupt, my only real options are r and leaving it in a box. And r definitely has better results than the box.
Preemptively buying products I don't want yet has an even worse return than the box, since they need to be stored and decay over time.