Sorry, this isn't going to be a get rich quick post, but I do want to show you how you can make $1,000,000 and have that nest egg for when you retire!
I'm a firm believer that individuals of most income levels can afford to save and invest to have over $1,000,000 by the time they retire. After doing some math, which I will share with you below, I was pretty surprised about how easy it actually is. I've run several different simulations, based on different market returns and savings amounts, and I'm showing you below.
Let's break it down.
Math To Save and Make $1,000,000
The Goal: $1,000,000
Time Frame: I'm assuming you are 25, and will save until you are 65, so 40 years.
Rate of Return: I'm running two different scenarios – 5% and 8%. Everyone always seems to quote 8% since that has been the historical norm, but if you're planning for retirement, I'd rather be a bit conservative.
Scenario 1: 5% Annual ReturnIf you want to save $1,000,000 at an 5% annual return, you need to save about $650 per month.Click To Tweet
Scenario 2: 8% Annual ReturnIf you want to save $1,000,000 at an 8% annual return, you need to save about $300 per month.Click To Tweet
How To Get There
First, I want to highlight the huge disparity in result by just fluctuating the rate of return by 3%. Over the time frame of 40 years, the rate of return can really make a huge difference. As a result, you would want to recalculate a truer rate of return each year or so as you get closer to retirement and you have a true measure of how your portfolio performs.
However, even in Scenario #1 above, you can save that much!
Ways to Save:
If you need to save $7,800 per year, there are a few ways to do it. First, make sure you are taking full advantage of your employer's retirement benefits. Many employers offer a 401k match – and according to The 401k Help Center, the most common contribution amount to a 401k is 6% of pay. That means, if you make $50,000 per year, taking advantage of your employer's match would deposit $3,000 into your 401k. Since you have to contribute $1 for $1 to get the match (on average), that means you would have to also save $3,000.
Just focusing on your 401k, you've already saved $6,000 toward your goal of $7,800. Now, you only have $1,800 left to save, which is only about $150 per month. I think most individuals could find $150 if they really tried – by budgeting, working side hustles, or more.
If you want more money saving ideas, check out our ultimate list of 15 ways to save $500 per month!
Important Tax Reminder:
It's important to think about taxes as you go for the $1,000,000. You need to think about whether you are counting your million before or after taxes. Taxes can take a large bite out of your income, but if you plan your saving correctly, you can avoid these.
Readers, what are your thoughts? Do you think most people can save $1,000,000 if they tried?