First-million story #7 - Invest a little and let it grow

Neil McCarthy started investing in the stock market when he was 34, in the depths of the 1970s bear market. "It got scary for a while," he recalls, "but my philosophy was to invest a little bit and let it grow. When stocks went down, I would buy more."

McCarthy contributed the maximum to both his IRA and his 401(k) at Union Carbide, where he started as a research chemist and got a boost from a 100% employer match. He and his wife, Maureen, who worked as a teacher for several years, continued to save for retirement, even while they were paying for their two sons' college educations.

Their big payoff came with the 1990s bull market. "Everything kept adding up and compounding, and then it doubled in three or four years," says Neil. "It was $500,000, and suddenly it was $1 million."

The McCarthys invested mostly in stock funds, but avoided technology companies. "People were going wild with Internet stocks, but it didn't make sense to me," says Neil, who did financial analysis when he worked in marketing for Union Carbide. "When I saw P/E ratios of 200 to 300, I thought it was absolute nonsense."

Their practical investing style preserved their millionaire status when the market crashed. They also benefited from a bit of fortuitous timing when Neil, who spent the last 14 years of his career working for BP Amoco, retired in 2000. He took his retirement payout as a lump sum and invested part of the money in an immediate annuity just before interest rates started to fall, getting a bigger payout than if he had chosen the company's pension annuity.

Neil, 65, and Maureen, 61, have $1.3 million in savings, which they haven't had to touch. Counting the annuity and Neil's pension from his 20 years with Union Carbide, they have a net worth of about $2.1 million. And that doesn't include their house in Roswell, Ga., valued at about $525,000, which is almost paid off.

The McCarthys are classic stock-market millionaires, reaping the benefit of steady investing through bull and bear markets. But one piece of simple advice made all the difference: "If you wait to save out of what's left over from your salary, it's not going to happen. Pay yourself first."

TIP #7: Don't cut and run. Steady investing through bull and bear markets helped Neil and Maureen McCarthy build a comfortable retirement kitty.