In the midst of the debate and discussion surrounding the 1% versus 99% dichotomy, I've heard the claim that making it into the 1% is just a matter of avoiding consumer spending. I decided to do a kind of test of this theory.
Firstly, we should clarify the definition of the 1%. Most people have been defining it by income, but it is really more proper to define it by wealth. Economix had a good article on this topic. They explain that although the 1% are typically defined as those earning more than $380,000 per year, the 1% can also be defined as those with net worth totaling more than $8,400,000.
So, let us assume that you earn the 2010 median household income of $49,445. We'll also assume that you avoid consumer spending altogether. That's right, we'll assume that you somehow avoid all living expenses, and save 100% of your income. While we're at it, we might as well throw in an assumption that you somehow avoid paying any taxes. You then invest the money at a rate of return of 9.59% (the 20-year average S&P 500 total return). If you start this process at age 18, you'll enter the one percent club by the time you're 50 years old. You can surmise that adding in a small tax rate or living expenses would mean that you won't live long enough to enter the club at all.
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