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Back of the napkin analysis: If you wanted to retire in 20 years, how much money would you have to invest today?

Back of the napkin analysis: If you wanted to retire in 20 years, how much money would you have to invest today?

All Cryptocurrencies

by COINS NEWS 66 Views

Was doing a quick thought experiment and thought I’d share the results here.

First, figuring out how much you would need. I’m going to calculate for one person, but of course if you are in a committed relationship, have kids, have family to support, whatever, you’ll need more. AARP suggests you conservatively assume a 4% active return from your money. So savings of $1 million would generate $40,000 of passive interest annually. ( I want to live it up a bit when I retire, so I’m going to double that and aim for a retirement goal of $2 million.

Now, figuring out crypto returns. The mean annual return for just Bitcoin from 2017-2020 was 408.8%, ( but obviously there was a ton of volatility in that time. I expect crypto to become less volatile over time, but to also offer lower and lower annual returns. Additionally, there are alts to invest in that are even more volatile than Bitcoin. It’s impossible to peg down an exact number, but for the sake of the thought experiment I’m going to go with 25% annually, or about double the average return of the S and P 500 (

So now I just plug the numbers into an ROI calculator ( The results show that to reach $2,000,000 in 20 years, you would need to invest $23,000 today at an average annual return of 25.02%.

Now of course the whole crypto market could just blink out of existence, but this experiment made me feel a lot better about my financial ability to invest in the market. I don’t have $23,000 invested today, but that is an amount I can easily reach or exceed if I continue to DCA what I can from my paychecks each month.

TL;DR: To have $2 million in 20 years, you’d need to invest $23,000 today and hope for at least a 25% annualized return.

Hope this helps someone, and feel free to sound off on my methodology ????

Edit: Just to clarify, I recognize this is an imperfect analysis - that’s why I called it “back of the napkin.” I landed on 25% annually because I expect more gains now and less later. Honestly, if you think that number is way too high, why not just invest in an S and P fund and take the fairly consistent 10-13%? I also never said you should just put your crypto money in BTC, it’s just that data for it is more easily available so I used it as the example. Personally I’m invested in BTC, ETH, and a few altcoins.

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