Imagine…

A child is born 72 years ago. Grandparents or parents place $100 into an investment account at birth and continue contributing $100 each birthday. When the child begins working, they take over the annual contributions. After 72 years, a total of $7,200 has been invested.

How much is the account worth today?

The answer in a moment — but first, let’s review the investment assumptions:

1. The securities purchased represent the broader stock market.
2. No commissions are charged.
3. A financial institution is willing to hold the account.
4. No taxes are due during the accumulation period.
5. Dividend reinvestments occur without fees.

And the human assumptions:

6. The child continues making annual contributions.
7. The child doesn’t liquidate the account to buy a car, a house, or pay for education.

Under those assumptions, the account would be worth $1,000,000 today. However, none of the first five assumptions were available 72 years ago.

When we launched Katz Family Financial Advisors, we made all five of these features available to our clients. And now, 14 years later, these assumptions are far more widely accessible.

Assumptions 6 and 7 are entirely within the control of the investor. We estimate that two investor behaviors — Patience and Planning — account for two-thirds of long-term investment success. These behaviors are deeply embedded in this type of retirement plan.

If you wait until age 22 to begin, the required annual contribution rises to $800. Wait until age 42, and the annual contribution must jump to the IRA maximum of $6,000. All these numbers are based on the market’s 100-year average return of 10% compounded annually. While short-term returns are currently below that level, rates may recover. Still, it may be wise to contribute more than historical figures would suggest.

This is just one approach to using time and the securities markets to build a retirement portfolio. We’re happy to help integrate this approach with your other assets and workplace retirement plans to help you reach your financial goals. We can also explain the unique investment strategy we use to create a safe, high-quality, and growing portfolio at a reasonable value.

Time is the biggest advantage a young investor has. Don’t waste it.

Katz Family Financial