The Fabulous Mogambo (TFM) summarizes why investing for the long-term for retirement is a fallacy, where you might be able to break even, but not likely, due to inflation and fees and such:
So how much retirement money did you put away in1965? Well, according to thepeoplehistory.com, the average income in 1965 was $6,500 a year, so you put away 10%, which is $650 a year.
By comparison, a new car cost $2,650 in 1965, rent was $118 per month, and a loaf of bread cost 21 cents.
Today, the average income in the private sector is around $40,000 a year, which is about right, since the Bureau of Labor Standards says that inflation since 1965 results in $1 of buying power in 1965 now requiring $6.94, which comes out to an annual inflation rate of 4.4% per year.
If you saved a whopping 10% of your 1965 gross income, or $650 a year, it would have to grow by a whopping 4.4% a year to $4,510 just to keep up with inflation, which is, sad to say, about what 10% of your $40,000 income today would be ($4,000).
And this is before paying taxes on the $3,860 gain, and not to mention all the fees and expenses paid along the way!
In short, because of inflation, expenses and taxes, you have to invest a month’s income to get a month’s income at retirement, meaning that your money did not grow at all.
And that is the absolute best-case scenario, in that investing is a zero-sum game, and with the government always taking money out, and the financial services industry always taking money out, there is less money for the investors to divide amongst themselves than was put in by the investors! Hahaha! “Investing for the long term!” Hahaha!
via Consumer Price Inflation: The Wolf at the Door.