Spend One Hour and Retire Rich

Here is a plan that will let you retire rich with very little effort. Read this article and with just one hour of planning you will be on your way to accumulating a very large amount of money. All you need is the discipline to save money each month and a plan to invest it safely.

Putting the plan together is simple to do. You don't need to attend financial seminars, do extensive reading or consult with financial planners and stock brokers. Just follow the simple steps described below.

Getting Started

First decide how much money you want to have accumulated by a certain age. For example, say you want one million dollars at age 60 and you are 40 years old.

Each cell of the next table shows you how much money you must invest every month for different time periods and rates of return to accumulate one million dollars. For example, to achieve the one million dollar goal in 20 years with a six percent rate of return on your investments, you must invest $2,164.31 each month for 20 years.

If you could not afford to save that amount of money each month, you can invest less each month and still accumulate lots of money. For example, if you saved $1,082.16 ($2,1614.31/2) each month, you would have $500,000 after 20 years. Or if you saved $541.08 ($2,1614.31/4) each month, you would have $250,000.

The table shows that the longer you save and invest the less you have to invest each month to reach your goal. For example, with a six percent return and ten years to get to one million dollars, you would have to invest $6,102.05 each month. But if started with 40 years to go, you would need to invest only $502.14 each month. Obviously it pays to start saving and investing at a young age.

Next, the table shows that for higher rates of return on your investments you need to save and invest less money than for lower rates of return. For example, if you earn an eight percent return over 20 years, you need to invest $1,697.73 each month to get your million dollars. But if you earn only two percent on your investments, you must invest $3,392.17 each month for 20 years.

When using this table, it's best to select a conservative rate of return such as four to six percent. If you select a high rate of return, such as eight percent, and you do not achieve it, you will miss the one million dollar target because you did not save enough money. Don't try to substitute overly confidant investing savvy for thrifty savings.

Getting a Six Percent Return

How can you achieve a long-term six percent return on your investments? Simply invest your money in a low-fee index fund or exchange-traded fund that tracks the S&P 500, the 500 public largest companies in the United States. Invest in any of these low-fee S&P 500 funds: Fidelity Spartan 500 Index Fund (FSMKX), SPDRs (SPY) and Vanguard 500 Index Fund (VFINX). You can open an account with Fidelity or Vanguard to buy their index funds. And you can buy the SPDRs, an exchange-traded fund, from any full-service or on-line broker.

And be sure to reinvest all of the dividends paid out by the fund. Just select the dividend reinvestment option when you open your account. Each time the fund pays a dividend, you will automatically purchase additional shares. For example, if you were paid a $100 dividend and each share of the fund was currently worth $20, your account would be credited with five additional shares. Dividend reinvestment lets you accumulate additional shares without spending new money from your pocket. Over many years, these dividend-generated shares can add up to produce significant gains.

Then set up a monthly automatic transfer from your bank account to the fund of your choice. As the money is transferred each month, you will purchase shares of the fund. Automatic investing ensures that you actually put the money aside and invest it each month.

Start Today

You now have a savings and investment plan that is on automatic pilot. Remember that any amount saved is better than nothing saved. So start saving for your future today.

Related Articles:

Getting To One Million Dollars for Retirement Takes Discipline
Quick and Simple Retirement Calculator
Retirement Calculator - Three Easy Steps

Posted January 31, 2007.

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