00:00At a 7% average annual real return, historical U.S. stock market average after inflation,
00:06$1,000 per month grows to roughly $173,000 in 10 years, $521,000 in 20 years, and $1.22
00:15million
00:16in 30 years. Compounding, not the contributions alone, drives the bulk of that growth in later
00:22years. At a higher 10% nominal return, pre-inflation S&P 500 historical average,
00:29the same contributions reach approximately $205,000, $759,000, and $2.26 million over the
00:38same periods. Breakdown by time horizon and assumption. 1. 10 years, 7% real return, $173,000 total,
00:48of which $120,000 is your own contributions, $53,000 is growth. Short horizons rely more on
00:58your contributions than compounding. 2. 20 years, 7% real return, $521,000, $240,000
01:07contributed, $281,000 growth. Growth now exceeds contributions, the compounding inflection point.
01:163. 30 years, 7% real return, $1.22,360,000 contributed, $860,000 growth. Over 70% of the
01:29final total comes from returns, not deposits. 4. 10% nominal, no inflation adjustment, at the same
01:37horizons roughly adds 15% to 85% more to each figure. But this ignores that inflation erodes
01:43purchasing power, so real returns matter more for planning. These are projections based on
01:48historical averages, not guarantees. Actual returns vary yearly and can be negative for
01:54extended stretches, e.g., 2000-2010 was roughly flat for U.S. stocks. The number changes sharply
02:02with your actual rate of return, contribution consistency, fees. A 1% expense ratio can cut
02:0830-year totals by 15-20% and whether you're investing in a taxable account, returns reduced
02:15by capital gains tax versus tax-advantaged. Practical step, use a compound interest calculator
02:21with your actual expected return and time horizon rather than relying on a single average figure,
02:27and prioritize keeping fees low and contributions consistent over trying to beat the market rate.
02:33Finally, remember that everything we discussed today is for educational purposes only and does
02:39not constitute financial advice. Good luck to everyone and see you in the next video.