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The Millionaire’s Mortgage

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The following is an excerpt from FELIX SALMON | July 25, 2018 | Slate.com |

There’s a lot of discussion lately about how to save up $1 million for retirement. The conversation began with a press release from Fidelity, which means it has invariably been framed around investing in stocks and bonds. Put as much money as you can into your 401(k) year in and year out, repeat for several decades, and with a bit of help from the market, you too could find yourself a millionaire.

But there’s another way of doing it, one that takes advantage of a worrying fact about the present: Housing is eating the world.

That’s Alex Tabarrok’s pithy formulation; the slightly less pithy version is that housing values are eating up more and more of the money in America’s (and the world’s) cities.

To put it in less abstract terms: If you go to college you’ll earn more money, even after taking into account the cost of student loans. But in order to earn more money, the chances are you’re going to have to live in a pretty rich city. And if you’re living in a pretty rich city, then you’re going to have to spend a lot on housing. The extra money you spend on housing is going to cut quite deeply into whatever extra money you make by dint of having gone to college—and make it hard to keep making those 401(k) contributions every month.

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