My $2,000 invested 35 years ago = $64,400.
Posted on March 7, 2025
Every January I track what happened to the $2,000 I contributed to my IRA many years ago. I contributed to my own IRA the first week of January for at least 20 years starting in 1980. I look back at my contributions to my IRA 35 years ago: I imagine that I put in $2,000 in a gift envelope and bought shares of a stock index fund. It sat there untouched for 35 years, accumulating shares from dividends reinvested; price per share also changed. I open the envelope each January now and see how much is there. This January 1, it had securities worth $64,400. I made ~32 times my money in dollars. That’s about 13 times my money when measured in real spending power. That’s terrific but below the average of past years. This post shows the details.
I did the key things right:
• I saved every year starting in my 20s.
• I saved more than 10% of my income (our income for Patti and me).
• I mostly saved retirement accounts with no taxes on the growth.
• I invested solely in stocks.
• I invested in a broad-based mutual fund that performed at least
as well as a low-cost S&P 500 index fund.
Details:
I can use Morningstar to see the growth in value for any mutual fund over all the years it’s existed. Here is the history for the past 11 envelopes from my $2,000 investments invested in an S&P 500 index fund. My $64,400 this year is about 32 times my original $2,000.
== I should inflation-adjust: 13X ==
I want to find the growth multiple in real spending power. That’s what counts. This table restates all the numbers to dollars as of December 2024. The real amounts that I invested each year declined because I was limited to the same $2,000 . The $2,000 allowable contribution wasn’t adjusted for inflation until 2000. (The $7,000 allowable contribution for 2025 roughly matches the contribution level in 1981.) My multiple this year was ~13X and the average has been ~15X.
== Better than expected 12X ==
My 15X is better than the expected 12X real return for stocks. The long-term real ~7.1% growth rate for stocks translates to 12X following the Rule of 72: stocks double every ~10 years. 35 years would be 3½ doublings. Three doublings for 30 years would be 8X (1 to 2; 2 to 4; 4 to 8) and the five years is half way to 16X = 12X. All the multiples have been better than that: each 35 year sequence of returns starts at a point on the graph and ends at a point the is ever so slightly steeper than that 7.1% line.
Conclusion. Every January I look back to see what happened to the $2,000 that I contributed to my IRA many years ago. I started that in January 1980 and contributed $2,000 each year for two decades: the contribution limit did not adjust for inflation until 2000. Each year I look back at the $2,000 that I invested 35 years ago. I can see the growth of my investment – which never changed for 35 years – from the Morningstar site. My investment in 1990 grew 32 times in dollars. My multiple in real spending power was ~13X. The multiples of my last 11 contributions have been slightly better than one would expect from the long-run real return rate for stocks of ~7.1%.
The lesson is to save and invest when you are younger. Save in retirement accounts and benefit from no taxes on growth; invest solely in stocks; never vary from investing and holding a very low cost, broad-based stock index fund.