Make Me A Millionaire By 40!

Okay, now that I have your attention, let's talk.  While this is possible, it's quite risky and you may end up with very little.  However, here's a one way to make you a millionaire by the time you retire.  Best of all it doesn't even take all that much work.

All you have to do is save $4,000 in a Roth IRA for the rest of your life until retirement.  With luck (smart management, smart asset allocation, controlled risk, and a hope the market doesn't spiral down) you'll be a millionaire at retirement.  As some people like to call this strategy GET RICH SLOWLY or GET RICH EVENTUALLY.

----+---+------------+---+----------+-------------
Year|Age|Contribution|APY|  Growth  |  Balance
----+---+------------+---+----------+-------------
2007| 23| $ 4,000.00 | 0%|$---------|$    4,000.00
2008| 24| $ 4,000.00 |12%|$   480.00|$    8,480.00
2009| 25| $ 4,000.00 |12%|$ 1,017.60|$   13,497.60
2010| 26| $ 4,000.00 |12%|$ 1,619.71|$   19,117.31
2011| 27| $ 4,000.00 | 8%|$ 1,529.38|$   24,646.70
2012| 28| $ 4,000.00 | 8%|$ 1,971.74|$   30,618.43
2013| 29| $ 4,000.00 |10%|$ 3,061.84|$   37,680.28
----+---+------------+---+----------+-------------
2014| 30| $ 4,000.00 |12%|$ 4,521.63|$   46,201.91
2015| 31| $ 4,000.00 |12%|$ 5,544.23|$   55,746.14
2016| 32| $ 4,000.00 |12%|$ 6,689.54|$   66,435.67
2017| 33| $ 4,000.00 | 8%|$ 5,314.85|$   75,750.53
2018| 34| $ 4,000.00 | 8%|$ 6,060.04|$   85,810.57
2019| 35| $ 4,000.00 |10%|$ 8,581.06|$   98,391.63
2020| 36| $ 4,000.00 |12%|$11,807.00|$  114,198.62
2021| 37| $ 4,000.00 |12%|$13,703.83|$  131,902.46
2022| 38| $ 4,000.00 |12%|$15,828.30|$  151,730.75
2023| 39| $ 4,000.00 | 8%|$12,138.46|$  167,869.21
----+---+------------+---+----------+-------------
2024| 40| $ 4,000.00 | 8%|$13,429.54|$  185,298.75
2025| 41| $ 4,000.00 |10%|$18,529.88|$  207,828.63
2026| 42| $ 4,000.00 |10%|$20,782.86|$  232,611.49
2027| 43| $ 4,000.00 |10%|$23,261.15|$  259,872.64
2028| 44| $ 4,000.00 | 7%|$18,191.08|$  282,063.72
2029| 45| $ 4,000.00 | 8%|$22,565.10|$  308,628.82
2030| 46| $ 4,000.00 |10%|$30,862.88|$  343,491.70
2031| 47| $ 4,000.00 |10%|$34,349.17|$  381,840.87
2032| 48| $ 4,000.00 | 6%|$22,910.45|$  408,751.32
2033| 49| $ 4,000.00 | 7%|$28,612.59|$  441,363.92
----+---+------------+---+----------+-------------
2034| 50| $ 4,000.00 |10%|$44,136.39|$  489,500.31
2035| 51| $ 4,000.00 | 8%|$39,160.02|$  532,660.33
2036| 52| $ 4,000.00 | 9%|$47,939.43|$  584,599.76
2037| 53| $ 4,000.00 | 7%|$40,921.98|$  629,521.75
2038| 54| $ 4,000.00 | 6%|$37,771.30|$  671,293.05
2039| 55| $ 4,000.00 | 6%|$40,277.58|$  715,570.63
2040| 56| $ 4,000.00 | 7%|$50,089.94|$  769,660.58
2041| 57| $ 4,000.00 | 6%|$46,179.63|$  819,840.21
2042| 58| $ 4,000.00 | 5%|$40,992.01|$  864,832.22
2043| 59| $ 4,000.00 | 6%|$51,889.93|$  920,722.16
----+---+------------+---+----------+-------------
2044| 60| $ 4,000.00 | 4%|$36,828.89|$  961,551.04
2045| 61| $ 4,000.00 | 5%|$48,077.55|$1,013,628.60
2046| 62| $ 4,000.00 | 6%|$60,817.72|$1,078,446.31
----+---+------------+---+----------+-------------

You can see in this spreadsheet that I took into account variances in the market and also a more conservative spread as you get older.  You can see the $4000 contributed anually and you can see the result of your balance: as promised one million dollars at retirement.

You know what's even better?  IT'S IN A FREAKING ROTH IRA WHICH MEANS AT AGE 65 AND A HALF... you can take out almost every penny* six months after your 65th birthday... AND NOT OWE A SINGLE PENNY IN TAXES ON THAT MONEY!!!  Aren't Roth IRAs great?

Of course you wouldn't want to ACTUALLY do this, but it's great to know you can.  What you would want to do is take out what you need to live and allow the money in your account to keep growing and growing.  Do you notice that "growth" column?  That's the money you make on interest and capital gains every year BY DOING NOTHING!  That's why the saying "it takes money to make money" is so true.

Now, you're a millionaire and you owe no taxes on that million dollars you have.  And you're probably MORE than a millionaire because (hopefully) by this time you have at least one house paid off.  You also probably contributed to a 401(k) which should have your employer's free matching money giving you probably more than a million dollars in that account (you'll have to pay taxes on it when you take it out, however).  So when you add all these things up... I bet you ARE a millionaire by 40. 

 *You have to keep your money in a Roth IRA for at least 5 years before withdrawing it to avoid penalties.  So really at age 65 and a half you could take out all but $20,000 penalty free - which, by the way, is still over a million dollars.