If you’re old enough to read this, it’s probably too late for you to take full advantage of one of the oldest and most foolproof investment plans around: the proven notion that you can retire comfortably if you just save $1 a day. The catch? There are two, actually. First, you must start saving when you’re born. Second, you’ve got to leave your savings to compound, without spending the earnings or paying taxes on them.

But if it’s too late for you to cash in on this idea for yourself — we’ll tell you a little later how much it would take to "catch up" if you didn’t start when you were born — there’s probably a young person in your life who could benefit from this. We’ll show you how to put your investment knowledge to work, along with a modest sum of money, to eventually produce spectacular results for a child, a grandchild, a niece or nephew. The trick — and this is absolutely essential as you will see — is to start early. That means somebody has to do it for the child, at least in the early years.

So here’s the nitty-gritty math: If you save $1 a day, or $365 a year, and invest it for long-term growth that averages 10 percent, from the day you’re born until you are 65, you will wind up with a retirement nest egg of more than $2 million on your 65th birthday. Get a compound rate of return of 11 percent, and you have $3.2 million; 12 percent gives you $5.4 million. And even if you only make 7 percent in long-term bonds you’ll have $450,000.

Of course, it’s not quite as simple as it sounds. Otherwise, everybody would retire as a millionaire. There are five main hurdles and we’ll look at how to overcome each. First, you’ve got to save the $1 a day, and by the time you wise up to this plan, at least a dozen years have probably gone by. Second, you have to leave the money there to build up, no matter what happens before you’re 65. Third, you have to keep your earnings for yourself, not give them away to the tax man. Fourth, you’ve got to achieve a growth rate of at least 8.65 percent in order to hit the $1 million target. Finally, inflation will nibble away at the buying power of your money and 65 years from now, in 2061, $1 million won’t be worth what it is today.

1. You’ve got to have the money.

Let’s say you’re precocious and you figure this whole thing out on your 12th birthday. Wow, you conclude, that’s what I’m going to do. By then you’re probably able, if you have enough determination, to come up with the required $1 a day. But you’ve already lost 12 years and that’s a crippling blow to our plan. To illustrate, let’s assume you’re going to achieve a compound growth rate of 11 percent. If you start on your 12th birthday, by your 65th birthday your $1 a day will grow to $926,013, only 29 percent of the $3,248,813 you’d have if you started the day you were born. (I know that’s hard to believe but you can do the math yourself. There’s a huge difference between a 53-year investment and a 65-year one.) So what are you going to do at age 12? How much money would you need in order to "catch up" with what you didn’t save in your younger days?

When you turn 12, you have already lived 4,380 days (not counting a few leap year days like the one we get this month) and you are behind by $4,380 in savings. But even that much won’t come close to getting you caught up because you have lost 12 years of accumulated earnings. To truly "catch up" at age 12 requires $9,202. That’s way out of reach of any 12-year-olds I know. So if you’re 12, you are just stuck — unless you have an uncle, an aunt, a parent or grandparent or perhaps a godparent smart enough and fortunate enough to help you "catch up."

And how much does it take to catch up to the $1 a day regimen at various ages? We figured it out assuming a parent put in $365 on the day a child was born and on every subsequent birthday. We also assumed an 11 percent tax-deferred return. Here’s how much you’d need to deposit into an investment account to make up for lost time. You’d need $2,523 at age 5, $6,775 at age 10, $13,940 at age 15, $26,012 at age 20, $46,355 at age 25, $80,633 at age 30, $235,727 at age 40, $676,103 at age 50, $1.93 million at age 60. If you wait until you’re 64 — well, forget it!

Those numbers look pretty daunting. But remember, this is a $1 a day plan. If a parent and grandparent teamed up and started early, they could probably fund this plan during the first 30 years of a child’s life — for a total outlay of $10,950. And you’d achieve almost all your eventual goal if you just stopped there. Even if the child never added another penny, those first 30 years of payments would compound at 11 percent to be worth about $3.11 million by age 65.

How do you start? As a practical matter, it’s pretty hard to invest $1 and get an 11 percent compound return. But if you can start with $1,000 by the time a child is 2, you’ve got enough to invest in a tax-deferred no-load variable annuity, which we’ll describe in a moment. (And the excess above the $1 a day will make a huge difference when that child is 65!)

2. You’ve got to protect the money from raids.

A lot can happen in the first 65 years of anybody’s life and a stash of money that’s just sitting around waiting for retirement can seem like a tempting solution to any number of problems. But you’ll never achieve your goal unless you prevent your child or grandchild from "raiding the treasury" when things get tough. How do you do that? Unfortunately, there’s no foolproof method short of setting up a trust and that’s cumbersome and expensive. You can keep the assets under your control, or somebody else’s control, while the child is a minor by using the Uniform Gift to Minor’s Act. But once the child becomes an adult, the money is in his or her control.

That’s one reason we suggest you embark on this plan using a variable annuity. That way, any withdrawals before age 59½ will be subject to income taxes plus a 10 percent I.R.S. penalty. That penalty is enough to stop many people from raiding a retirement account. But the penalty may seem like a small cost to a young person who regards the whole account as "free money." Ultimately, there’s no way outside of a trust to guarantee the money won’t be withdrawn prematurely. But if you are savvy enough about money to read this newsletter, and if you care enough about a young person to set up such an account, you can educate that person about the advantages of leaving this money alone. Let him or her know that at age 65, it will be a source of income, say 10 percent a year of whatever the balance is, rather than millions of dollars to spend all at once.

3. You’ve got to keep the money away from the tax man.

Obviously, if you have to pay taxes on the investment earnings every year, you won’t achieve 11 percent compound growth. I think a variable annuity is the perfect vehicle, especially since a new breed of "no-load" annuities is hitting the marketplace. An annuity is an insurance contract that bundles a collection of mutual funds inside a tax-deferred arrangement similar to an individual retirement account. Your investments into the annuity aren’t tax-deductible and the child (technically known as the annuitant) will have to pay taxes on the money when it’s withdrawn. But earnings within the account build up without any current tax liability.

Annuities usually entail sales commissions and early surrender penalties. But the "no-load" variety is sold without those provisions. There isn’t space here to describe these products in detail, but we know of two that have $1,000 initial investment minimums: the USAA Life Variable Annuity (800-531-8066) and the Janus Retirement Advantage (800-525-3713), both let you choose among seven mutual funds. And the Scudder Horizon Plan (800-343-2890), which includes six mutual funds, has a minimum investment of $2,500. You’ll see advertisements and perhaps hear sales pitches for these products from other companies, too, including Charles Schwab (800-435-4000) and T. Rowe Price (800-638-5660). Be sure and study the fees and charges carefully before you invest.

Income tax isn’t your only I.R.S. pitfall. If you are the owner of the annuity, the value of the account will be included in your estate — and subject to taxes — upon your death. So be careful about how you complete the paperwork. You might want to consult an attorney specializing in estate planning, CPA or financial planner to make sure you get it right. In the variable annuity Doll and I have set up for our four-year-old daughter, Lisa is the annuitant and owner and other family members are the beneficiaries. Because Lisa is a minor she is the owner under the Uniform Gifts to Minors Act with Doll as her custodian. When Lisa is an adult she will be able to name her own beneficiaries – probably her children.

4. You’ve got to make the money grow.

FundAdvice.com readers know that we think the best way to invest for the long term is to balance assets inside and outside the United States and to protect against bear markets using our market timing systems. I think you should have a legitimate shot at an 11 percent average annual growth rate if you split your money evenly between US and international growth equity mutual funds. Choose a family that will let you do that. The exchange privilege is allowed in most variable annuities. Be sure and check the switching limitations before you invest. But if your time horizon is 50 years or more, you may not consider timing necessary. In fact, we think the worldwide equity approach will work quite well on a buy-and-hold basis although we are timing Lisa's annuity as well as those we have set up for our grandchildren. Why shouldn't we want to protect their assets against major bear markets? Plus, we believe they'll end up with more money by managing market risk.

5. You’ve got to recognize inflation.

A nest egg of $3.2 million (what you’ll have from 65 years of 11 percent growth) may seem like a fortune, but inflation has a way of gradually eroding sums that once seemed vast. In the year 2061, $3.2 million will be worth only $570,000 in today’s dollars and $5.4 million (the result of 12 percent growth) will be worth only $930,000 in today’s terms. And almost all that money will be taxable when it’s withdrawn. But remember, all you put in was $1 a day. And you can achieve almost all of this even if you stop when the child is 30, in which your out-of-pocket outlay is a mere $10,950.

Personally, I like the idea of increasing your contributions every year by an inflation factor. If you adjust the $365 annually for 3.5 percent inflation, your second-year investment is $378, your third-year investment is $391, etc., until that final payment of about $3,300 in the 64th year. Doing this, you’ll wind up with $3 million instead of $2 million at 10 percent growth, $4.7 million instead of $3.2 million at 11 percent and $7.6 million instead of $5.4 million at 12 percent growth.

Any way you cut it, this is a superb way to assure some young person’s future. The key is to do it and above all, start early.