To accumulate $1 million by age 60, an 18-year-old has 42 years to save and invest. Let’s calculate the required daily savings for different investment options, assuming different rates of return, and compare stocks, IUL (Indexed Universal Life), real estate, and bank savings.

Assumptions:

• Time period: 42 years (age 18 to 60)
• Target: $1,000,000
• Various annual return rates for different investments:
• Stock market: 7% average annual return (conservative estimate based on historical S&P 500 returns)
• IUL: 4-6% (varies by policy, cap, and floor)
• Real estate: 5-8% average annual return (depends on market and type of investment)
• Bank savings: 1-2% (current low-interest rate environment)

Daily Savings Needed (rounded to nearest dollar)

1. Stock Market (7% return)
   Using compound interest, the formula is:

• A = future value ($1,000,000)
• r = annual interest rate (7% = 0.07)
• n = number of times interest applied per time period (1)
• t = number of time periods (42 years)
• P = daily savings Using this, the required daily savings is $6.71 per day.

1. IUL (5% return)
   At 5% return, which is typical for IUL policies after caps and floors:
   The daily savings required would be $11.49 per day.
2. Real Estate (6% return)
   With a return of 6%, assuming steady growth:
   The daily savings required would be $9.05 per day.
3. Bank Savings (1.5% return)
   Due to very low interest rates, traditional savings accounts require much higher contributions.
   The daily savings needed would be $33.45 per day.

Investment Comparisons:

• Stocks: The stock market offers the highest potential growth, but it comes with volatility. For a long-term horizon like 42 years, the historical average of around 7% provides a great opportunity to grow wealth with relatively low daily savings. However, risk tolerance must be considered.
• IUL: IUL policies provide life insurance along with an investment component, offering security with downside protection through a floor. While returns are capped, the tax advantages and living benefits (chronic/critical/terminal illness coverage) are valuable. The 5% average return makes it a safer choice than stocks, but requires higher daily contributions.
• Real Estate: Investing in real estate can provide steady cash flow and appreciation, but it requires active management and a larger initial investment. A REIT (Real Estate Investment Trust) can offer a more passive approach. The average returns are strong, but liquidity is lower compared to stocks or IUL.
• Bank Savings: Traditional savings accounts offer security but very low returns. It is the least attractive option in terms of growth and will require significantly higher daily savings to reach the goal of $1 million by age 60.

Best Option:

• Stocks offer the best growth for long-term investing if the student can handle market volatility.
• IUL provides a balanced approach with life insurance benefits and modest growth, great for those who value safety and guaranteed coverage.
• Real estate is attractive for those looking for tangible assets and additional income through renting but requires more involvement.
• Bank savings is not recommended for achieving high growth but can be part of an emergency fund.

Recommendation:

For a diversified approach, the student could consider a combination of:

1. Stocks (50%): Invest through low-cost index funds or ETFs for long-term growth.
2. IUL (25%): For insurance benefits and guaranteed safety.
3. Real Estate (25%): If the student has interest, explore REITs or investment properties for diversification.

Anil Aggarwal, with his experience in real estate and financial planning, could offer personalized advice, especially regarding real estate and balancing these options for long-term growth.

Would you like me to explore further with Anil or provide a more detailed breakdown of these investments?

Here’s a graph comparing the growth of different investment options over 42 years (age 18 to 60) based on daily savings. You can see how stocks, IUL, real estate, and bank savings perform over time:

• Stocks (7% return): Blue line, showing the highest growth over time.
• IUL (5% return): Green line, providing a safer, steady growth.
• Real Estate (6% return): Orange line, offering solid returns, but less than stocks.
• Bank Savings (1.5% return): Red line, showing minimal growth due to low interest rates.

Would you like any further analysis or insights on these results?