Hey kid, want to retire with a million bucks? Just pump a couple of grand into your 401k plan every year for seven years and you can do it. Wait a minute, you say … how could a 401k plan turn a $14,000 investment into $1,000,000? A mere 401k plan? It must be a trick! Well, of course it is …

I was a good kid today and took my mom to her podiatrist appointment. A magazine headline caught my eye while I was sitting not-so-patiently in the waiting room. The article explained how grandparents could insure that their grandchildren retire with that fabled million dollars … all by investing in a 401K plan.

So what’s the trick?

It’s all in the power of compound interest, my friends.

While I didn’t remember to clip the article, the gist of it sunk in to my brain. Once I got home, I plugged the numbers into a spreadsheet and figured it out.

If you invest $2,000 in a 401k plan every year between the ages of 16 and 22, and if the 401k plan returns an average of 10% yearly, you’ll end up passing the million dollar mark by the time you reach 64.

Okay, so that’s a significant pair of ifs …

Who has the gumption (and the spare change) to invest $2,000 per year in a 401k at that age?

That’s where your grandparents are supposed to come in to the picture …

And that ten percent yearly rate of return?

You’ll do well to invest that wisely …