Want to be a Millionaire

[Tigermike 3,029]

Start on your first $1 million at age 16

It's easier than you think to become a millionaire. The magic combo? Getting an early start saving and having the discipline not to raid the piggy bank.

By Scott Burns

Here's a simple recipe to become a millionaire:

Work four summers, starting at age 16

Save the income in a Roth IRA account

Invest it in a simple, low-cost equity portfolio

Simmer slowly for 47 years

Serve ungarnished (and untaxed) at age 67

This is the first recipe in my new Small Change Millionaire Cookbook, an occasional series of columns with a single purpose -- demonstrating different ways small amounts of money can be turned into a large amount of money. Just as a mere 10 calories a day of additional food can pack on a pound a year, small change can become large amounts of money.

The good news is that money grows faster than fat. Calories don't have the benefit of compound annual growth.

Many people fail to diet because the end goal seems so far away. So it is with saving and investing: Most people fail because it is nearly inconceivable that a few dollars a day or a well-timed gift can be turned into that magical sum.

Fast-food millionaires

A million dollars. It has such a nice sound.

So let me show you how four summer jobs can become your first million.

Let's suppose that you are 16 years old, in high school, and willing to work. Let's also suppose that you can clear about $2,000 over the course of a summer, if only because a doting grandparent puts money in the Roth while you take your earnings to school. If you invest in a Roth IRA, it will grow, tax-free, for as long as you have the account. All withdrawals from the account after age 59 1/2 will be tax-free.

If your money is invested in common stocks and you achieve the average compound annual rate on large-capitalization U.S. stocks, 10.7%, your account will grow to $9,378 at the end of the fourth year. You will be 20 years old. Invested in the same way, with no additional savings, the account will grow to:

$25,917 by the time you are 30

$71,625 by the time you are 40

$197,943 by the time you are 50

$547,037 by the time you are 60

And $1,114,423 by the time you are 67

And you will have started and finished all of your saving before turning age 21.

Worth the risk

Note that this plan does not require investment brilliance. It does depend on two things, an early start and tenacity. If you invested in small company stocks, whose long-term annual return clocks in at 12.5 percent annually, you could have much more money. (Try $2.4 million.) Similarly, you could diversify to reduce your risk and make your 47-year ride more comfortable. But you would do it at the expense of a somewhat lower return.

The "Yes, but" crew will be happy to tell you that $1 million isn't what it used to be. I can remember people telling me this in the '60s. It is as true now as it was then. Millionaires are, well, just dreadfully common.

Even so, the number of millionaires is relatively small. And being a millionaire is a better choice than being a pauper.

The same crew will be happy to tell you that the future won't repeat the past, that SARS, terrorism or some other misfortune will cripple the future, or that we will be crushed by a rising China. Similarly, an actuary might tell you that you have a substantial chance of being dead by 67.

Perhaps.

But so what?

All you've got to risk is four summers.

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[eibua12 81]

Yup simple principles that they teach in business class. Problem is we (parents/adults (by age not demeanor) don't teach our kids this.

Actually the "Rich" of this country do better than the poor on this and this is part of the reason the classess remain separate.

Magic Johnson has opened a finance company to help people get their first home and teach the "Poor" of this country how to deal with money.

Why start at 16 I say start earlier, 529 plans are good and can be used for college. Issue is there are minimum age limits on IRAs so you can't start too early but what you can do is invest in a 529 let the money grow and use it for college Then take what you don't use out and put it in a Roth and let it grow for 47 years.

You can take the amount of all contributions out tax free after all it is your money. Also if the money has been in there I think more then 7 years ,might be 10, and you take it out even with the penalty you come out ahead.

Enjoy the fruits of compound interest.

One more for you

If you were to invest $4.26 a day (cup of coffee at starbucks) for 40 years you would have $1,000,000 so sweat the small stuff or ..

if you invest 50 bucks a month for 15 years then and have 20,000 to invest at say age 16 then you have will have 2million dollars in 41 years.

Go to a finance site and play with the number I find it fun and you can come up with all sorts of scenarios.

Be the turtle and retire rich.

[Bottomfeeder 244]

Another problem is that same dollar needs to be multiplied by 100% to enable the millionaire to buy a 5 lb. bag of suger. With inflation and a devaluing currency, a million is only a drop in the bucket, by today's standards.

Our dollar is worth .03 cents now, compared with before the appearance of the Federal Reserve.

[eibua12 81]

That is correct and that is what irritates me with all these Financial minds they all say you can be a millionare and here is how to invest to get there.

I used and internet calculator to get my quick numbers and part of that calc was what your money was worth with and expect 3% inflation and it was

$300,000 + Hmmmm could I retire on that, no

So here is the new formula

save $30,000 at age 16 invest it in a roth IRA (oops too much to put in at one time but worry about that later)

Invest $1,000 a month for I think it was 36 years

and you will have 4 mil at the end which equates to todays dollars of about 1.5 mil

Ok I can retire on that. Hmm so now where do I get 30k and hmmm where do I get and extra $1000 a month... hmmmm I need to find and extra 10 years to invest.

Man should have stayed a DINK... I am going to make my little girl a superstar and live off here like Jessica Simpsons parents do..

yeah more chance in that happening.

Moral of the story going to be tough to retire and I am not expecting Social Insecurity to be there. Save as much as you can teach you kids to save from when they are 5 and enjoy it along the way