How Easy is it to Save a Million Dollars?
Do you know what my favorite posts to read are? The ones about how saving a million dollars is totally easy! And guess what? There are THOUSANDS of articles about how easy it is to become a millionaire! I decided to aggregate a few of my favorites to drive the point home. Saving a million dollars over a long period of time is actually very simple!
How Much to Save Each Day to Become a Millionaire
Interest rates matter quite a bit when it comes to saving money. This Business Insider chart gives you a daily savings need based on 3 different return rates to save $1,000,000 by 65!
How Much to Save Each Month to Become a Millionaire
Kiplinger calculated, based on an 8% return how much you would need to save per month to become a millionaire by age 65. Here are the results:
- Age 25: $286 a month
- Age 35: $671 a month with zero savings. With $50,000 already saved, you only need to save $304 a month.
- Age 45: $1,698 a month with no savings. If you already have $100,000 saved, you only need to save $861 a month.
- Age 55: $5,466 a month if you have nothing saved! If you already have $200,000, you need to save $3,040 a month.
Young Adult Money provided a simple calculation for only $500/month: With a “beginning balance of $5,000. If you contribute $500 [a month] over 40 years with a 6% return, you’ll end up with $1,055,511.36.”
Millionaire Returns and Contributions
DoughRoller set up a chart showing how long it would take you, in years, to become a millionaire based on annual contributions and return rates:
So, if you want to be a millionaire in 31 years, you can either save $7,500 annually with an 8% return or $5,000 annually with a 10% return! If you want to be a millionaire in 10 years, it’s not on this chart so you’ll have to save significantly more than $15,000 a year.
The Green Swan compared three different scenarios for a 22-year-old becoming a millionaire as pictured on this graph:
Red line assumes:
- Starting Salary: $30,000
- Annual Pay Increase: 3%
- Annual Savings: 5%
- Annual Savings Increase (15% Cap): 1%
- Investment Return: 7%
- Age to Reach $1 Million: 61
Blue line assumes all the same thing except caps the savings rate at 25% instead of 15%.
- Age to Reach $1 Million: 58
Green line assumes the the same as the blue except starts with a starting salary of $45,000 instead of $30,000 (with a 25% savings cap).
- Age to Reach $1 Million: 53
First Quarter Finance looks at what would happen if you fully funded your Roth IRA every year: “For easy math, let’s just say I didn’t start putting money into my Roth IRA until age 18. Let’s assume an 8% annual return (very reasonable as the benchmark S&P 500 has gained nearly 12% since inception). The max annual contribution is $5,500. The money grows tax free. […] By age 70, I’ll have $3,987,645.24. […] Oh, and people age 50+ can contribute another $1,000 annual to their Roth IRA. I think that was added to help the late bloomers catch up. I didn’t take this into account with my near $4 million figure. So really, I’ll have $4,037,072.12.”
And, to finish it off, here is an AMAZING chart by Joe over at Retire by 40 of how much you would have if you had always maxed out your 401K. Mr. T started his job in 2009, which means he could have $195,113 (and the chart is based on December of 2015, so actually these values would all be higher!). That’s nearly twice what we have now… and that would just be his 401k!
In the end, what have we learned? It’s easy to become a millionaire by 65 if you consistently save! Set yourself a goal and get to it people! Track your progress with a FREE Personal Capital account!
CHECK OUT PART 2: People Who Became Millionaires Faster! – The actual numbers of people who did it WAY FASTER than 30-40 years!
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