Aiming High: How Can I Amass a Fortune by the Time I Retire?

  • By Carrie Schwab-Pomerantz, CFP®, President, Charles Schwab Foundation; Senior Vice President, Schwab Community Services, Charles Schwab & Co., Inc.
  • April 16, 2013


Dear Carrie,

What do I need to do to make $20 million by retirement?

—A Reader


Dear Reader,

Thank you for the provocative question! Even though it may seem far-fetched to many, it also raises some interesting issues for any investor.

To begin to answer your question, let’s start with some numbers. Assuming that you’re young and not planning to retire for 40 years, that you’re starting with nothing besides the desire to be rich, and that you can earn an average annual return of 7 percent, you would need to invest $100,000 every year for the next four decades to arrive at $20 million.

Given this, the slow but steady approach to building wealth—starting early, saving 10-15 percent of your salary, creating a diversified portfolio, paying attention to investment expenses, and selecting the right asset allocation for your stage in life and your goals—is probably not going to get you to your goal. I'm not saying it's impossible, but few people have the wherewithal to sock away $100,000 per year. And a consistent 7 percent return is far from a sure thing. The reality is that traditional investing strategies are designed to help people build wealth—but not build great wealth.

In other words, to get truly rich through investing, you would need to “swing for the fences.” Invest every penny you have, for example, in the next Google or Microsoft or Facebook. It would be a high-risk, high-reward strategy—and, of course, you'll need to be quite savvy to identity the next Google, Microsoft, or Facebook. I'd say your chances (i.e., anybody's chances) are incredibly slim.

You Could Become Famous…

So how can you amass a fortune? Well, you can start with a fortune (the "it takes money to make money" theory). Or you could become a star in professional athletics, win several gold medals at the next Olympics, or make your fortune as a very famous actor or entertainer. Needless to say, these are the longest of long shots—and even if you knew today you were gifted in some way, you'd still need a lot of hard work as well as some lucky breaks to turn that gift into riches.

Or Start a Business…

Many great fortunes are made by entrepreneurs, people with a great idea and the tenacity and talent to turn it into a substantial business. Successful entrepreneurs pour their heart and soul into their ventures; they invest all their personal capital (brains, work ethic), and, typically, all their financial capital as well. And if they succeed, the payoff can be very handsome. Many of the founders of Silicon Valley high-tech companies are billionaires, not millionaires. Just be warned that even talent and hard work are no guarantees of entrepreneurial success; you'll need to get lucky in that realm too.

Or Work (and Save) Very Hard…

No doubt most of these ideas are long-shots. But one other way to achieve great wealth without needing quite so much luck is to choose a high-paying profession—investment banking, the law, or plastic surgery, to cite a few examples—and work your tail off so that you can earn a salary that will allow you to save hyper-aggressively. (In fact, I have friends who made a well above average salary right out of college, and now kick themselves for not saving more!) Of course you might not be able to save $100,000 a year, but in some professions, you could earn a salary that would let you really sock a lot of money away from a relatively early age.

Just one final thought: Before you make any decisions, examine your priorities and ask yourself how much you really need. If your motivation is to retire rich, by all means go for it. But a comfortable retirement for most people requires much, much less than $20 million.




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