I recently read in a newsletter that 3.5% of American households are millionaires. A survey done by Thomas Stanley and William Danko and published in their book The Millionaire Next Door shows that about 80% of millionaires are first-generation millionaires. Two-thirds of millionaires are self-employed or are professionals. They also found that the median annual household income was $131,000. So basically, most the rich people in America got there by hard work and saving their money. If someone is living in the projects and are walking around wearing a pair of $150 sneakers and wondering why they can't afford to pay the rent, they have their priorities all out of whack.

If you want to retire with a decent size chunk of cash, all you need to do is start saving early. If you invest just $2000 a year (max contribution for 2005 and beyond is $4000) into a Roth IRA for 45 years, and assuming a 10% annual rate of return you will have $1.5 million in cash tax free. If you only invest for 35 years, that drops to $600k.

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