Dale Jackson

Personal Finance Columnist, Payback Time

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It’s hard to be optimistic on a dreary Monday when markets are tanking, but there is a glimmer of hope for young people with time for their investments to compound. With a little discipline they can retire millionaires through a strategy called the seven per cent solution.

There are several potential variations that can meet a similar goal, and it’s never too late to start. To illustrate how the seven per cent solution works best while you’re young, assume you manage to save $10,000 by your 25th birthday. From there, assume your investments can generate a seven per cent inflation-adjusted annual return. Here is how much you need to invest at each stage of life to accumulate a million dollars by age 65. 

• At 25 you would need to invest $320 a month. In some cases, an employer will help out by contributing to your pension and you can get an edge by re-investing your registered retirement savings plan (RRSP) refund.
• If you wait until you turn 35 to start investing that $10,000, you would need to come up with $775 a month to retire a millionaire at 65.
• Hopefully, you will be in your peak earning years by the time your turn 45 because you would need to add $1,850 a month to that $10,000 to reach your goal.
• With only 10 years to retirement, a 55 year old would need to invest a whopping $5,700 a month to retire a millionaire.