Will investing in a retirement fund make me a millionaire?

Q: It seems we constantly hear from different financial experts in the news about the importance of investing in a Roth or 401(k) at a certain age, so that we can amass "half a million dollars" (as one analyst stated), by the time we retire.

How can anyone predict how much money they'll have by the time they retire when they have no idea what the stock market will do over the next 30+ years? Aren't these predictions based on the overall historical performance of the market, which experts acknowledge isn't necessarily an accurate indicator of future performance? It seems like quite a contradiction, and yet experts keep throwing around terms like "half a million" or "a million dollars." I'm concerned that all of this hype is giving people a false sense of security -- all they have to do is invest faithfully in a Roth or 401(k), and they're on their way to becoming millionaires! What's your take on this?

A: My "take" is this is the only chance most people have to become a "millionaire" -- and the real issue is not whether the stock market will perform over the next 20-40 years, but whether people will "perform" and do their part by investing the money!

There has never been a 20-year period -- going back to 1926 -- where you would have lost money in a diversified portfolio of large company stocks, with dividends reinvested, even adjusting for inflation!

In fact the average historical return has been about 10.2 percent. Investing in America is the ordinary individual's best chance to create wealth. Of course, if you don't believe in the future of America, then you really don't have to plan for retirement!

Terry Savage is a registered investment advisor and the author of the newly published The Savage Number: How Much Money Do You Need To Retire? (256 pages, Wiley, $24.95).