If you had a dollar for every time you heard the phrase “Start investing early,” you could retire with a million. If you actually acted on the phrase, you are probably retiring with more. Now is the time to encourage your children and grandchildren to start saving as soon as they get their first job.
Let’s assume that your teenage child or grandchild is employed for five years from age 16 to 21. During this time, he or she saves $277 per month ($3,326 per year) and invests the money in a Roth IRA (paying taxes, of course, but at a low tax bracket). This may be a serious sacrifice for a teenager, so any contribution from you would be of great help. Assuming the money returns the historical equivalent of a diversified 60% stock/40% bond portfolio, your child can retire at 65 with $1 million tax-free, without having to invest another dollar after age 21.
Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. Government bongs are guaranteed by the full faith and credit of the United States government as to timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than bonds.
Source: Stocks in this example are represented by the Standard & Poor’s 500, which is an unmanaged group of securities and considered to be representative of the stock market in general. Bonds are represented by the 20-year U.S. government bond. An investment cannot be made directly in an index. The data assumes reinvestment of all income and does not account for taxes or transaction costs. The diversified portfolio was rebalanced every 12 months. The return used for calcualations was the average of 50- year rolling returns for 1926-2010.
Reader Comments(0)