Am I on track to be a millionaire by 50?

Recent graduate James Fisher’s goal is to be worth $1 million by age 50.

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by Julie Cazzin
May 14th, 2012

From the June 2012 issue of the magazine.

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The goal: Recent graduate James Fisher’s goal is to be worth $1 million by age 50.

The current situation: When 24-year-old James Fisher graduated with a degree in business administration three years ago, he started working towards his lifelong goal of having a net worth of $1 million by age 50. “I’ve been interested in money since I was a boy,” says Fisher, who lives in Ottawa. He paid off his $21,000 student loan with money from his $52,000 salary and $10,000 bonus from his job as a bank manager. His parents helped by giving him a 20% down payment on his $300,000 condo—he’s renting out a bedroom for $550 a month to help with the mortgage. James currently has a net worth of $132,600, most of which comes from the condo.

Right now James is saving $500 a month and he plans to invest his annual bonuses as well. He won’t make any more RRSP con- tributions, however, because he doesn’t like the idea of having a large tax liability in the future. James has $6,600 in an RRSP and $6,000 in a non-registered account, mostly in exchange-traded funds. “I’m concentrating on the equity markets,” says James. “That’s where I believe good future gains will be.”

The verdict: James should be able to meet his million-dollar goal, as long as life doesn’t throw him a curveball, says Jason Heath, a fee-only adviser and partner with Objective Financial in Toronto. If James increases his current savings in line with future pay raises, he will actually have close to $2 million at age 50, assuming an annual rate of return of 6%. However, this would require him to invest using RRSPs: although they result in tax upon withdrawal, they also provide a tax refund that James could reinvest. If he continues investing outside his RRSP, he’ll have $1.6 million by age 50. Heath reminds James that he’ll keep more of his returns by maxing out his Tax-Free Savings Account (TFSA) before using non-registered accounts.

What could throw James off track? Marriage, kids and a bigger home could put a wrench in his plans. And don’t forget, $1 million in 26 years will be worth about $598,000 in 2012 dollars, assuming 2% inflation. While that’s not pocket change, it may not provide James with a millionaire’s lifestyle.

The breakdown:

ASSETS

-Condo $300,000

-RRSP $6,600

-Non-registered investments $6,000

-Total assets $312,600

LIABILITIES

-Mortgage (at 4%) $180,000

-Total liabilities $180,000

NET WORTH: $132,600

10 comments on “Am I on track to be a millionaire by 50?

  1. What is the interest rate and terms on his parent's 20% downpayment that was given to him? This will also have an effect on his net worth.

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    • It's not listed in his liabilities, it appears like it was a gift.

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  2. James should not forget that but for his parents he'd still be renting right now and/or saving for the down payment on his condo.

    In the three years since graduating he has come to a net worth of $132k. Of that, $72k is his own. Considering that he has paid of $21k in student loans, he appears to have the ability to build net worth at a rate of $31k a year. Not bad on an income of $68k+ per year. Wait until he has a wedding or has to buy a house.

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  3. Being a millionaire isn't a big deal, especially before you're 50.

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    • I totally agree. 1 million dollars is not what it used to be. I am on track to being one at 40 (not 50) and I don`t think its worth writing about. Lots of people can be millionaires at 50 if they actually tried and had any financial discipline.

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  4. Even if you don't reach a million the fact that you are taking the time to understand your finances and budget makes you ahead of the rest… debt free is the way to be! Cheers Mr.CBB

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  5. James has been working 3 years. He has saved $21,000 to pay off the student loan + $6,000 non registered + $6,600 registered = $33,600. In 3 years. This is $11,200 per year. He saved this much without having the condo, condo fees, property taxes or furnishings to buy for it. Perhaps he'll save less per year now?

    He has 26 years to go. Using a savings "forecaster" model at 6% assuming he keeps putting in $11,200 per year, he'll have $759,626.80. Not a million.

    He will also (hopefully, depending on the term he selected, but he did go in with less than 25% down, so likely carries a long term on this) have paid off the condo. Hopefully it will not need maintenance in those 26 years. I doubt it will appreciate for 26 years since fewer people will be looking for condos and, of course, new condos can easily be built right across the street / down the street with the latest and greatest features.

    I think he needs to step up the savings, use an RRSP to get some tax back in the interim (forget the tax "payout" problems) and make sure the condo doesn't eat into his monthly savings.

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  6. CAN U LEND ME SOME MONEY, AM IN DEBT. GOD BLESS U.

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  7. If this is the complete story on Jame's knowledge of investments, (no TFSA , no RRSP because he will one day have to pay tax). I think he has to develop deeper understanding of investments.

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