How much do you need to save, from any age, to retire a millionaire?

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A million dollars. Sounds like a lot of money doesn’t it? You’re right – it is! But it’s also a quite reasonable goal for many Americans. Let’s see how much money you would need to save each month, week, or day – to retire a millionaire.

How much do you need to save to retire a millionaire? A financial coach answers.

A million dollars

First, let me say that a million dollars is just an arbitrary number. You might need more, or less, to fund your retirement. Based on estimates using the 4% rule, you could draw about $40,000 each year from that balance. That might or might not be enough. Your best bet is to calculate how much money YOU personally need to retire comfortably.

Next, when I talk about how much you need to save, I mean invest. You save the money so you can invest it. Money sitting in a bank savings account doesn’t grow very quickly at all. (If you aren’t already investing and want an easy-to-use and low-cost solution, check out Betterment. We’ve reviewed a lot of options and they really stand out as the best. You can read our full Betterment review for more details.)

Last, let me state the obvious. I have no idea how old you are. I also don’t know when you plan to retire. So I’ll use some assumptions and estimates to calculate the amounts needed.

Calculation assumptions

For the purpose of this post I’m assuming a retirement age of 65. I’m also calculating investment needs based on the ages 20, 25, 30, 35, 40, 45, 50, and 55 years old. Additionally, I’m going to assume a 9% average annual return on the money. That’s less than total average annualized returns of the S&P 500. (What is the S&P 500 Index?) Depending on how you invest, and market cycles, your returns could be higher or lower. We need a number though to run calculations and this number seems quite reasonable based on historical returns.


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For a 20-year-old to reach a million dollars by age 65

This is the “easiest” to achieve. The earlier you start investing, the less you need to invest. It’s the magical power of compounding.

“Compound interest is the eighth wonder of the world.” – Einstein

Given the assumptions noted above, a 20-year-old would only need to save and invest $135 each month to reach a million dollars by retirement. Another way to look at it would be just $31.15 each week or $4.44 each day. Can you young people find a way to save just under five dollars per day? I bet you can. In fact, here are three tips for living within your means.

For a 30-year-old to reach a million dollars by retirement

At age 30 it is still isn’t that bad. Yes, the amount needed to save and invest each month has more than doubled – to $339/month. But think of this: That’s about the total of what the average cell phone bill plus the average cable TV bill total. It’s quite a lot less than the average car payment. This is still very achievable for many people.

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To retire with a million starting at age 40

Would you be surprised to hear that the amount has more than doubled again? This is the power of compounding. The earlier you start to save and invest, the easier it is to achieve big goals. It’s exponentially easier when you start earlier.

Okay, let’s say you’re 40-years-old and just remembered that you haven’t saved anything toward retirement (but you have, right?) – I mean starting with literally a $0 balance. In that case you are going to need to save $892/month or $205/week.

It’s starting to sound like big numbers now! But this is still quite reasonable for many people. About half of Americans have two car payments. The average car payment in American is right around $500/month ($503 when I recently checked). Knocking out the car payments and investing that money instead can put you well on the path to millionaire retiree status.

Something else to consider: If you have a 401k plan at work that will match 50%, you might only need to contribute about $8,000/year. With the match you’ll likely exceed the target goal amount. Also, remember that a 401k is pre-tax, so that $8k you put in there might only impact your take-home pay by around $6k in a year – $500/month. That sounds a lot more reasonable, right?


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For a 50-year-old to retire a millionaire

The power of compounding is a great thing when you start early. But it really works against you when you get started late.

To reach a million dollars in just 15 years – from age 50 to age 65 – you’ll likely need to invest$2,643 each month. That’s $31,716 over a year.

Here’s some good news though. Starting at age 50 you get to make “catch up” contributions to your retirement plan. That means that on top of the regular $18k/year (for 2017) you can put in an additional $6k/year. That $24,000 plus an employer match gets you pretty close to your goal. Remember too, as noted above, that’s pre-tax dollars. So at a 25% tax rate it only “feels” (and looks) like $18k to your take-home pay.


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The full charted results I calculated

Here is the chart of numbers I calculated for this post. I figured ages 20, 25, 30, 35, 40, 45, 50, and 55. I also split the numbers into monthly, weekly, and daily amounts. Before you comment that the weekly times four doesn’t equal the monthly amount, remember there are 52 weeks in a year, not 48 (not 12 months x 4 weeks) – so that’s expected.

how much to save to retire a millionaire?

What do you think?

There you have it. That’s how much you need to save and invest each month to retire a millionaire. What do you think? Are you surprised by any of the numbers? Do you think it will be easier or harder to achieve than you guessed? Will you make this goal a priority and work to achieve it for yourself?

 

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Want to retire a millionaire? Here's how much you need to save (and invest) each month broken down by age. We've also included some tips to help reach the goal. #retirement #wealth #budgeting

24 Comments

  1. Mrs. Picky Pincher June 15, 2017 at 1:08 pm - Reply

    Oh man, it’s so hard to know your ideal retirement number, since it depends on your expenses and savings rate. This also changes quite a bit if you plan to retire early. My rule of thumb is to save as much as humanly possible, since most people don’t save enough anyway.

  2. Gary @ Super Saving Tips June 15, 2017 at 8:14 pm - Reply

    If this chart doesn’t convince someone of the power of compounding, I don’t know what will! The problem, of course, is that most of us wait too long to start saving and make it harder on ourselves.

    • Brad Kingsley June 15, 2017 at 8:20 pm - Reply

      Indeed Gary! We need to get the message out to the younger generation to help them help themselves.

  3. Scott Sullivan June 15, 2017 at 11:00 pm - Reply

    Brad,

    Thanks for this information. I just shared this with Patrick and he was shocked with how little it takes a month.
    If he wanted to start now, where would he go? What kind of initial investment would he need?

  4. Grant @ Life Prep Couple June 16, 2017 at 12:30 am - Reply

    I’m busy saving for her college but if stared a Roth IRA in my daughters name right now with $3,692.14 she would have a million by the time she retired. Crazy! However, In 65 years a million will probably not be very exciting.

    • Brad Kingsley June 16, 2017 at 10:36 am - Reply

      Not sure how old she is, but you’ll need to put her to work first. 🙂 Can’t contribute to an IRA without earned income. I do know some people who’ve set up a system to pay their kids for “services performed” so they could start retirement accounts nice and young.

  5. Alex C. @ Asset plus June 17, 2017 at 10:48 am - Reply

    Interesting, did you think of the 9% investment rate split into 12 months to be more accurate or you took the bulk of cash?

    Also, what happens if you hit a financial crisis, I know you will be affected for at least 3 years in a row before a comeback.

    • Brad Kingsley June 17, 2017 at 11:27 am - Reply

      Hi Alex! Yes, for the monthly amount it assumes an annualized 9% but deposits made monthly. Dollar cost average investing tends to be the best way to deploy consistent cash into the market. If you are sitting on a big lump sum, statistics show that it’s best to put that all in at once then use DCA for additional deposits.

      As for the “crisis”: There are bear markets on average every 4-5 years. That’s part of normal investment cycles and should be accepted. KEEP DEPLOYING MONEY even during market swings. When the market is down you are purchase companies on sale! 🙂

      And the average bear market lasts 15 months, not three years. Some have lasted that long but most don’t.

      If you need any of the investment cash within five years, I would not have it invested. That’s why 10 years is the shortest investment timeline that I calculated for this post. With at least a 5-year horizon you should be able to ride out any market cycles with no problems.

      Thanks for stopping by!

  6. Matt Kuhn @ Profitable Matters June 18, 2017 at 1:07 am - Reply

    I really like that chart – it’s crazy how much compounding can decrease the overall amount of money you put in over a lifetime. I’m curious, does that 9% account for inflation? I often wish that I had learned about compounding a little earlier in life, but it’s still pretty early for me (late twenties) so I know I’ll be fine. Honestly, I plan on ‘retiring’ early (from the full time job at least) with 1.25 million within 10-15 years, so I’ll be hustling and saving like crazy until then.

    • Brad Kingsley June 18, 2017 at 11:50 am - Reply

      Hi Matt. No, this doesn’t account for inflation. This is strictly building to a million dollar investment account – not “the purchasing power of a million in today’s dollars”. My post on How Much Do YOU Need To Retire does account for inflation though. You might want to check that out. Especially since you’re knocking on the door of early retirement. Good job on that BTW!!

  7. Save Splurge Deny Debt - Cameron June 18, 2017 at 4:36 am - Reply

    I had a math teacher in high school show us this type of calculation. That helped me understand compound interest early.

    I move up a couple of age groups even though I am only 28. With early retirement goals I try to save like a 45-50 year old!

    Great article, thanks for posting!

    • Brad Kingsley June 18, 2017 at 11:51 am - Reply

      That’s awesome Cameron! I wish EVERY math teacher would explain this to their students. Any sort of financial education seems to be mainly lacking from the US public education system unfortunately.

  8. Dividend Diplomats June 18, 2017 at 7:30 pm - Reply

    Love articles like these. Gets me motivated to keep on saving and keep on chugging. I use a more conservative figure in my calculation to be safe (6%-7% based on the mood I am in). But the numbers make me happier once I see an example such as yours that has a slightly more aggressive rate included.

    You hit the nail on the head. achieving these figures is not impossible. By carefully choosing your habits and controlling the expenses you have, you can easily make room in your budget for the amounts you display in the article.

    Thanks for taking the time to put this article together!

    Bert

    • Brad Kingsley June 19, 2017 at 11:00 am - Reply

      Thanks for stopping by Bert! The 6-7% might be more accurate for you – it all depends on how an individual invests. The CAGR I use in most calculations is based on the S&P 500 Index. Many people mix in some bonds which brings the CAGR down a bit. Other people mix in small caps and international, which can bring the CAGR up a bit. I think it’s a great idea to work from conservative numbers and hope to be pleasantly surprised. 🙂

  9. Mustard Seed Money June 18, 2017 at 7:45 pm - Reply

    I’ve been obsessed with being a millionaire since I was a little kid. It was pretty stupid but I thought when I made a million dollars that I’d be rich and never have to work again. So I’ve been saving since I was a little kid. While I’m not there yet I am working diligently towards the goal 🙂

    • Brad Kingsley June 19, 2017 at 11:03 am - Reply

      Hi MSM. I hear ya! I thought basically the same when I was younger. My goal was a million by 30 (I missed it by a few years). Someone who is super-frugal like Mr Money Mustache might be able to live off that, but most people couldn’t (or wouldn’t chose to) retire on a million alone. At least not early retirement. Once Social Security kicks in it starts to get more realistic.

  10. Mr. Need2save June 19, 2017 at 9:12 pm - Reply

    I’m on the conservative side with $$$, so we use lower growth numbers in our calculations – topping off at around 7%. Even with a lower growth amount, things can really start to take off with the magic of compounding. In so many ways, time is the most precious asset we have.

    We’ve been focused on what we believe is our financial independence number, which for the lifestyle we want, is a bit more than 1 million for the both of us.

    • Brad Kingsley June 19, 2017 at 9:20 pm - Reply

      Thanks for stopping by N2S! Yeah, I lean conservative with my personal targets too, but I do think we’ll continue along the past trend line of 9-10%. You’re right – the power of compounding, regardless of the specific rate, is amazing! It’s so much easier to achieve any big financial goal when you start early.

      It’s great that you have an FI number in mind. If you’ve written a post on how you calculated it, I’d be curious to see and share it. I plan to write a similar post for ourselves here sometime soon.

  11. Rob @ Money Nomad June 20, 2017 at 12:55 am - Reply

    Awesome article here. And the realization that $31k/year could make you a millionaire in 15 years has me motivated to really start hustling now! This also has me thinking about the concept that I just heard of recently – a child IRA. If you help your child save for retirement from their high school earnings/etc, it wouldn’t take much at all for them to retire millionaires.

    • Brad Kingsley June 20, 2017 at 10:20 am - Reply

      Thanks Rob! Yes, an IRA for a child is an EXCELLENT idea – just know that only “earned income” can go into an IRA though, so make sure there the child is getting paid for some efforts before putting money in the account. You don’t want to deal with the IRS over problems in the future.

  12. Lily He-Prudhomme June 20, 2017 at 10:04 am - Reply

    The best tip is time! (: Start young, start young, and start young! It’s pretty easy if you’re young but if you lose that advantage…it’s going to get ugly. I wish money wasn’t such a taboo, sensitive subject. I would like to advise casual friends but I don’t have any authority…yet! 😉

    • Brad Kingsley June 20, 2017 at 10:21 am - Reply

      I love it – “top 3 tips” = start young, start young, & start young. 🙂 Thanks for stopping by Lily!

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