By Andres Izaguirre and Gillian Charter

Would you like to become a millionaire? We normally tend to think that we can only become millionaires if we receive a substantial inheritance or if we win the lottery. However, you could also become a millionaire through regular and systematic savings and investments.

The first step is to establish your goal for retirement. Would you be comfortable with a quarter million, half a million or a million dollars? Whatever amount you choose, you need a clearly defined goal and a plan to achieve it. Undoubtedly, if you are married, you will build your nest egg at a faster pace.

The second step is to prepare a comprehensive budget, which should include all your monthly expenses, including a provision for other seasonal or expected expenses such as vacation, medical and dental office visits, car repairs, Christmas gifts, etc. You should attempt to live on 80 percent of your net income and live within your means. You may be one of those who believe in setting aside 10 percent of your income for charity. That is your choice. The other 10 percent is for your savings and investments. It is recommended that this 20 percent be deducted from your paycheck and sent electronically to a financial institution of your choice. If you don’t see the money, you won’t miss it and won’t spend it.

The third step is to start saving and investing, as young as possible, because you have time and compound interest on your side. Consider this. If a 30-year-old starts saving $2,000 yearly in an IRA or a Roth IRA account, and deposits $2,000 at the beginning of each January and continues depositing $2,000 until he or she is 65, by the time this person is 66 years of age, the value of the account will be about $252,536 at 6 percent interest, or $514,752 at 9 percent interest, or $1,085,197 at 12 percent interest per year, assuming that no withdrawals are made. This is something many people do not realize.

The average person may feel that $1 million is unattainable because the average Baby Boomer has less than $50,000 in savings. However, the example shows that any person saving and investing a consistent amount per year in a financial institution for 36 years can accumulate an incredible amount. If you look at the numbers, that person only saved and invested a modest amount of $72,000 ($2,000 x 36 years); but time and compound interest made the big difference.

The value of your portfolio will change if you delay opening your savings or investment account; deposit a larger or smaller amount each year; or are comfortable with a lower risk rate of return of 6 to 8 percent, instead of 12 percent per year. However, even contributing a small amount now can have a significant impact on your retirement savings because the sooner you begin investing, the more time your money has to grow and compound.

Remember that Americans are living much longer than they used to, so that means that you will need a larger nest egg to get you though retirement. Therefore, the time to take corrective action is NOW. If you think that it is impossible to save $2,000 per year, go to a bank or credit union today and open an account and instruct that $75 be deducted from your paycheck and sent electronically to your account. Within a year, you will have saved approximately $2,000.

Even better, if you can, take advantage of the opportunity to deposit $4,000 per year in a Roth IRA up to 49 years of age or deposit $5,000 if you are 50 or older. If you make an effort and continue to save and invest annually these larger amounts, your nest egg will grow much faster. Listed below is a Table to show the growth of your investment at three different interest rates: 6%, 9% and 12%.

	Interest rate:	12%	9%	6%
Age	Contribution	ValueYr.end	ValueYr.end	ValueYr.end
30	2000	$2,240	$2,180	$2,120
31	2000	$4,749	$4,556	$4,367
32	2000	$7,559	$7,146	$6,749
33	2000	$10,706	$9,969	$9,274
34	2000	$14,230	$13,047	$11,951
35	2000	$18,178	$16,401	$14,788
36	2000	$22,599	$20,057	$17,795
37	2000	$27,551	$24,042	$20,983
38	2000	$33,097	$28,386	$24,362
39	2000	$39,309	$33,121	$27,943
40	2000	$46,266	$38,281	$31,740
41	2000	$54,058	$43,907	$35,764
42	2000	$62,785	$50,038	$40,030
43	2000	$72,559	$56,722	$44,552
44	2000	$83,507	$64,007	$49,345
45	2000	$95,767	$71,947	$54,426
46	2000	$109,499	$80,603	$59,811
47	2000	$124,879	$90,037	$65,520
48	2000	$142,105	$100,320	$71,571
49	2000	$161,397	$111,529	$77,985
50	2000	$183,005	$123,747	$84,785
51	2000	$207,206	$137,064	$91,992
52	2000	$234,310	$151,580	$99,631
53	2000	$264,668	$167,402	$107,729
54	2000	$298,668	$184,648	$116,313
55	2000	$336,748	$203,446	$125,412
56	2000	$379,398	$223,936	$135,056
57	2000	$427,166	$246,271	$145,280
58	2000	$480,665	$270,615	$156,116
59	2000	$540,585	$297,150	$167,603
60	2000	$607,695	$326,074	$179,780
61	2000	$682,859	$357,601	$192,686
62	2000	$767,042	$391,965	$206,368
63	2000	$861,327	$429,422	$220,870
64	2000	$966,926	$470,249	$236,242
65	2000	$1,085,197	$514,752	$252,536

Andres Izaguirre is a fraud investigator in the Enforcement and Investigation Bureau and Gillian Charter is a financial analyst with the Risk Finance Bureau.