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Comment by nradov | Hacker News Reader

The vast majority of 401(k) funds are in large-cap mutual funds which don't invest in IPOs. Most 401(k) plans also offer some sort of money market or Treasury bond fund. It takes about 5 minutes and zero skill to learn that T-bonds are safe investments.

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It’s not like treasuries or money market return acceptable returns for people’s retirement portfolio.

What is an "acceptable" return? No one has a right to achieve any particular return.

A return that lets you retire in this lifetime seems to be the minimally acceptable return.

Return by itself is meaningless. If you want to discuss retirement then you have to account for the other variables: consumer price inflation, risk, contribution levels, lifespan, etc. For individual workers the most practical suggestion is to save more instead of expecting high returns.

Most people don’t make enough money to save that much money so they can retire.

The number of new cars, new iphones, large houses, and other luxury purchases suggests otherwise.

that's not great logic.

https://www.washingtonpost.com/graphics/2017/national/senior...

Treasuries and money markets basically return zero after inflation.

So, at least more than zero.

I never understood how anything can return more than zero after inflation "in the long run". If it did, then over time people with that asset would have all the wealth. But if they did, then they would buy things with it, raising prices of everything else.

You may want to peruse some of the econ stuff from mit ocw:

https://ocw.mit.edu/courses/economics/

Things don't return a lot over zero in the long run. Maybe 5-7% in the absolute best case for long term returns. Enough that even a million dollars generates maybe less than $40k of reliable income.

Most people need to expend so much of their income just to live that this mostly doesn't affect the average person.

But yes, the rich get richer. They don't always buy things proportionally more, some of it just sits there.

I never know if "the rich get richer" means the people on the tail of the distribution now will be farther out in the future, or if it means the people on the tail of the distribution in the future will be farther out than the people on the tail now.

That's actually a very good point. That's kinda why Housing will always return 0 (real return - not including all the costs, like property taxes, repairs, HOA, insurance, etc) in the long run. And if we're actually making progress on housing, it'll return negative returns.

Now as for other stuff, returns can be greater than 0 because there's more stuff to buy, later on, hence greater than what there is today. There are two components to long term returns above 0: population growth and productivity growth. In the past century we've done quite well on both fronts. Productivity has expanded at 2% per year and populations have increased by a massive 1.6% per year, add to that the 4% dividend and 3.5% for inflation and that gives you the 10% return on equities everyone is quoting.

but the future returns are expected to be much much lower. labor force size in the US is projected to grow 0.4% and per capita increase in productivity is now at about 1% for the last 20 years. and dividends are roughtly 1.8%. So, in the longer term, not including a contraction in PEs, we can see roughly 3% increase in equities on average/yearly

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