28 yrs old or younger? Become a millionaire with $54,000.

[sv2007]

Of course there's a catch.
The catch is you'll be a millionaire when you're 70.

It's hard to over estimate the long term benefits of a tax deferred savings account (e.g. IRA, 401k) under most situations. This illustrates the benefits of compounding and tax deferment.

Below, are the screen shots of calculations for a 28 year old person who puts away $4500 each year for 12 years (4500 * 12 = $54k). A for comparison, another person who also puts away $4500 annually but starting at age 40. (Age 70 is used as the stop because that's the age when you are forced to take MRD.)

The 28 yr old only needs to put in $54k to get $1m, but the 40 yr old must put in $139.5k to get about 60% of the 28yr old.

What's more interesting is that the 28 yr old stopped contributions at age 40. That means he can use an extra $4500 for vacations (or extra savings).

What do you think?
Any suggestions for another way to help people see these benefits?
TIA

[sv2007]

Attachments above seems to not work; anyway, here's the year-to-year calulations.
The interest used is 8% APR; I picked it as a neutral number by today's standard.

[97guns]

you will have to hit a few investing home runs to reach that goal but im proof positive it can happen, pretty sure it will be very difficult with savings only. i didnt start saving and investing until i was 27, stopped working 12 years later and 5 years after that reached millionaire status

[TexasHusker]

With contributions of $2000 a year from age 23 on, even a monkey would have $1 million by 70 in the average index fund.

That's not saying much though. How many 70 year olds do you know that feel like spending any money?

And $ 1 million isn't much these days. If you remove it from the market, and put it in CDs to live off of, you might make $1,000 a month.

Finally, a lot depends on how many bear markets you live through, and exactly when and how long they occur. Some can last for a decade.

[sv2007]

I don't think 8% return over 30, 40 years is too unrealistic. Of course, this is talking about the future, so anything goes (unlike my previous S&P500 calculations, which is an absolute).

The point I wanted to make is that, saving $54k can give you $1m in a relatively unstressful manner. Without our advances in longevity, who knows what you'd be doing with that million (like going sky diving or skiing/surfing at exotic locations).

[Gailete]

Very good advice. Who was it that said compound interest was one of the 8 wonders of the world? The problem is so many that don't want to think ahead and won't put money aside. Even if a million isn't worth a million due to inflation when someone is 40, they will still be so much better off than the ones that don't save at all.

On these forums, so many have such high retirement accounts, it makes me feel bad with the little that I can do until the other day I hear how much the average family has saved for retirement. Maybe I heard it wrong, but it was $5K! I've managed to squirrel more than that away in the last 10 years. Pat myself on the back since I'm on disability and hubby has health problems and sometimes goes months without earning a dime. I'm already 60 but am hoping to hold off touching my retirement accounts for as long as possible by using good spending habits, good savings habits, researching the best savings vehicles, my on line store, etc.