Edits: This is a distraction from the world crumbling near me.

I just want to talk equations as those are distracting.

Original: I have been thinking of Generational Wealth lately, and my thinking is unrefined muddy. I wish to get feedback and your thoughts.

Before I learned of FIRE, I had assumed Generation Wealth required a wildly high sum of money (hundreds of millions of USD). Anything less was just a nice retirement. (I had also assumed retiring was simply impossible.)

Like with many things about compounding, it matters critically to not spend all of one’s money and to have time. Too little money or too little times and money goes to zero. Even a little more than the “balance” point, and the number go to infinity.

At 2 children per household, the number of households being supported grows at a larger rate than reasonable investment gains. The tripling time at 4% real gain is 28.01 years. (The tripling time for supported households is shorter than this. Tripling time chosen as the initial household will then become 3. Though in my scenario below the number of households in each 28 year period only doubles.)

If each new generation are comprised of twins, starts to receive on their 28th birthday, and sadly this is the day their grandparents die, then the balance seems to work out if the initial parents overshoot their FI number by about 66% either by over-saving or not withdrawing for years.

(Generational Wealth depends heavily upon how many children each generation produces. One under earner/over producer of children will sink the whole thing… )

It would seem the best I can hope to do is to give my children and grandchildren an education and a head start. They will have to live their own lives and make their own contributions to their retirements.

  • flatbield@beehaw.orgEnglish
    1·
    14 days ago

    There is some data that shows generational wealth dissipates in a few generations. This is probably for at least three reasons. As we know the majority of people are not very good at saving and investing. Lot of reasons for that but some is just short term thinking and consumer mind set. Also when you have kids, even if they have generational wealth, it is likely that their partner won’t. Finally there is a real timing problem. In the next generation both non-financial and financial help has the biggest effect between under say age 30. Starting kids out with good skills and no debt has huge impacts. Money later in life is not that useful.

    I’ll use myself as an example. The big advantage that I had was that I got out of college with good training, no debt, a car, and a job, and a small emergency fund and everything after was a fairly easy. I probably will actually inherit a fair amount of money at some point, but frankly I’ll be 70’s before that probably. It won’t have much impact. My financial life problem is already solved. Just pointing out that it was the under 25 years that mattered.

    Not against generational wealth to a point but I think the details are important.

    Edit: Just a reminder. Any low risk FIRE plan based on and investment portfolio generally has a big median estate. You can’t know what it will be, but it is likely to be large, though it could be zero.