RobbJK9
Joined: 19 Jan 2008
Location: Seoul, KR
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 Posted: Thu Apr 17, 2008 6:12 am Post subject: One Year One Million Challenge |
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Thought I'd throw this out there. I know that I save a lot of money being here and not having to pay any serious bills.
http://finance.yahoo.com/retirement/article/104801/The-One-Year-$1-Million-Challenge
| The Motley Fool wrote: |
It's true what they say: Youth is wasted on the young.
I'm not going to get all sentimental about how responsibilities are nil and possibilities are endless. No, the real waste is the time young folks have to compound their money.
The One-Year $1 Million Challenge
At a certain age, if you:
Max out your 401(k) contributions for one year,
Max out your IRA for that same year, and
Merely meet the market's historical 10% annual returns
... you'll wind up a millionaire by the time you hit retirement.
More from The Motley Fool:
� Why You Must Invest Now
� The One Gotta-Have Retirement Investment
� How to Make Money in a Flat Market
That age? Twenty-six. In 41 years of compounding at 10% annually, $20,500 ($15,500 in a 401(k) and $5,000 in an IRA) will turn into $1 million. And you'll never have to contribute another dime. Of course, inflation between now and then means that $1 million won't buy nearly as much four decades in the future as it does today. Still, it's a remarkable feat of compounding.
In fact, that's how you win the $1 million one-year challenge: You make time your biggest ally in amassing phenomenal sums of wealth.
You See the Absurdity Here, Right?
In order for most 26-year-olds to save $20,500 in a single year, they'd either need to find a fabulously high-paying job or a rent-free room in their parents' basement. Either way, they'd probably be living on a strict diet of ramen noodles.
It's a stretch goal for people just starting out in life, to say the least.
But here's some good news for those of us who long ago celebrated a 26th birthday: The power of compounding doesn't care whether you invest it all at once, or only save a bit at a time.
It's most important to simply sock away as much as you can, as quickly as you can, and let it compound for as long as possible. |
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