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Try giving your post-grad daughter or your 15-year-old grandson a Roth IRA for their birthday, and you may find the 'thank you's' perfunctory at best. But a starter retirement plan like a Roth IRA–you open it for them and give it a funding boost–is a gift that keeps giving. If they follow through on it, it could be the road to making them a millionaire.

At least that's what the projections are from the likes of Vanguard, the investment company, if they keep up the contributions. Vanguard sees the Roth IRA as the road to riches, millionaire style, if the plan is started early. Vanguard projections estimate that a 20-year-old investor who begins saving $200 per month in a Roth IRA, invested in a portfolio of 80% stocks and 20% bonds, would have about a 55% chance to accumulate over $1 million by age 65. On the other hand, if a 30-year-old investor follows the same program, the likelihood of being a millionaire drops to 14%. Why this works is the miracle of compounding–the process where investments make returns, and those returns make returns. The rule of 72 clicks in–that's where you take the rate of return you're making (such as an interest rate) and divide it into 72; that tells you how many years it will take for your money to double.

The nifty thing about Roth IRA is that, should there be a financial emergency, the contributions to it (but not the earnings) can be withdrawn for any reason. (That would, of course, impact the millionaire scenario.)In the meantime, the account is generating earnings that can continue to compound.

The Vanguard graph below shows how the wealth curve bends upward as time goes on (using the $200 a month from age 20 as an example) —especially as you get to 40 years and beyond. In this example, it takes 35 years for the median investor to get to half a million dollars. Then just 10 years for the next half-million. Then just 8 years to tack on another million.

Median projected value for an IRA with a $200 monthly contribution*

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