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Author: rainphakir Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 60025  
Subject: SS.. same strategy different tactic Date: 3/16/2007 1:30 PM
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Earlier, I outlined a strategy to get a $20,000 nest egg as early in life as possbile.

A problem pointed out by many readers questioned the ability to accumulate $20,000.


Here's a different way to achieve the nest egg :-)

Premise: $2000 growing at 10% APR for 63 years has the potential to exceed $1Million.

nest egg = $2000
time period = 63 years
APR = 10%

During the 1st year of life following birth, allow the parents to put $2000 (two thousand, tax deductible) into an account such as an IRA or 401k/403b in the baby's name (with the parents as custodians :-).
These monies would be invested in an INDEX mutual fund to limit fees and risk.

Every child regardless of gender, ethnicity, socio-economic status, etc would receive the same opportunity - as a BASE for retirement.

Taxes: please note that most IRA's, 401k/403bs grow Tax DEFERRED... and pay taxes at the NORMAL INCOME TAX rate upon distribution. Therefore this is NOT a 'tax exempt' strategy and society will get its cut :-)

Is $2000 doable in one year for the parents? How about letting the parents have a deduction to put say... $4000 ($1000/year X 4 years) into such an account over a period 4 years (this would jumpstart the compound growth)?

I stipulate that Yes, it's do-able :-)
ralph


For review, the above is a variation on the strategy that I outlined here
http://boards.fool.com/Message.asp?mid=25290190
which tries specifically to get a 'nest egg' into a person's life early enough so that compound growth can meet the future retirement needs of that person.

The premise:
$20,000 growing at 10% APR for 42 years has the potential to exceed $1Million.

Nest egg = $20,000
Time to retirement = 42 years
APR = 10%

I stipulate they are all do-able :-)
ralph





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