So you would like to be rich

Ah, wouldn’t we all?

Perhaps you can win the lottery?

Or maybe you can marry into a wealthy family?

How about a series of lucky stock picks through Robin Hood?

Then there is always Las Vegas?

If you weren’t born with a silver spoon, it can be frustrating to hear about folks who cash in as above or sell their start-up company for big bucks.

All of these happenings are rarities, outliers, long shots and many still end badly.

I can give you the formula for guaranteed financial security (almost).

Can you save $100 per week every week for forty years and invest it at 7% per year? If so, you will have $1,145,000.

I am looking at a 25 year old recent college graduate earning an average of $51,000 per year and saving 10% of his/her gross pay, most likely through an employee sponsored 401K plan. Due to income tax deferment, the after tax impact on their take home pay might be closer to 8%.

This program would allow the then 65 year old to earn $80,000 ($1.145M x 7%) on the accumulated wealth, combine it with approximately $25,000 of social security and you  live very well in retirement indefinitely.

If retirement takes place at age 70, the accumulated sum would be $1,474,000, adding potentially $23,000 to retirement income under the same assumptions.

Inflation has been ignored in these calculations since we have assumed that cost of living, compensation (and therefore contributions) and social security are generally moving in lockstep.

The chief risk in these calculations is that investment returns fall short of historic norms in coming years. However, even a 5% return over 45 years will yield $824,000 which returns $41,000 at 5% in retirement combined with $25,000 social security and would provide over $5,000 per month in retirement income.