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How To Be A Millionaire. You Need To Save Less than You Think


This is how to be a millionaire using standard investment strategies and accounts. This isn’t about increasing your income to the level of The 1%, it’s just about middle-class survival. These are the basics of financial literacy. 

“The best time to plant a tree was twenty years ago. The second best time is now.” Ancient Jewish Proverb

As is the case with so many things in life the answer to this question largely depends on how long someone still has to reach their goal. When looking at the equation for compounding interest, the factorial is time. Meaning the most impactful piece in the equation is time. 

ARE THESE NUMBERS REALISTIC? 

Yes, they are. According to a brief by Alicia H Munnell, published by the Center for Retirement Research at Boston College, the average retirement age has been rising since the ’90s. Her research states that the average age for men is 64 and the average age for women is 62. I’ll be splitting the difference and using 63 for our target retirement age. 

The Motley Fool published a report by Jason Hall that covers the average returns of the stock market and while you could easily calculate this yourself, his article is very convenient. According to Hall, the S&P 500 has averaged 6.8% each year over the last 50 years, after adjusting for inflation. This is the number we’ll be using for our calculations. 

Below are four examples starting at 20 years old and increasing a decade at a time to illustrate the time value of money. Each example provides both a lump sum figure and a monthly figure. Someone could either invest a lump sum on their 20th birthday or invest a set amount monthly starting on their 20th birthday and either way they should end up with $1,000,000 by their 63rd birthday. These are meant as two ways of reaching the same goal. If people can do both theoretically they would have twice as much money at retirement. If someone happens to be at any of these ages they can use these numbers. I encourage readers to use a financial calculator to do their math to find their specific numbers. 

HOW TO BE A MILLIONAIRE STARTING AT 20 YEARS OLD

A 20-year-old has 43 years for their money to compound before they reach the average retirement age. They could invest a lump sum of $59,079.5 or they could invest $312.04 every month and by age 63 they would have $1,000,000. 

HOW TO BE A MILLIONAIRE STARTING AT 30 YEARS OLD

A 30-year-old has 33 years for their money to compound before they reach the average retirement age. They could invest a lump sum of $114,064.05 or they could invest $637.33 every month and by age 63 they would have $1,000,000. 

HOW TO BE A MILLIONAIRE STARTING AT 40 YEARS OLD

A 40-year-old has 23 years for their money to compound before they reach the average retirement age. They could invest a lump sum of $220,223.00 or they could invest $1,385.35 every month and by age 63 they would have $1,000,000. 

HOW TO BE A MILLIONAIRE STARTING AT 50 YEARS OLD

A 50-year-old has 13 years for their money to compound before they reach the average retirement age. They could invest a lump sum of $425,180.99 or they could invest $3,533.27 every month and by age 63 they would have $1,000,000. 

IMPACT OF WAITING TO INVEST
Here’s the impact in lump sum contribution amounts to reach 1 million dollars by age

If someone waited until they were 50 years old to start saving for retirement they would need nearly 10 times as much money as some who started saving when they were 20 years old. 

Monthly contribution amounts needed to reach 1 million dollars by age

If someone was able to start at 20 years old they would only need to contribute $312 but if that same person waited until they were 50 to start investing they would need $3,533. Over 11 times more! 

WHAT DOES THIS ALL MEAN? 

The reason for taking a look at these numbers is to encourage you to start investing now. No matter the stage of life you’re in, by letting the magic of compounding interest work for you, you can have a large sum of money waiting for you when you’re ready to call it quits. The earlier you start though, the less money you need to invest to have a massive impact on your future. Had someone started saving at 20 years old they’d never need to max out a retirement account. Now just imagine if they did max out that retirement account at 20. 

Over 5 million dollars at age 63 if someone was able to max out their retirement accounts starting at 20 years old. Nearly 2 million dollars would be tax-free. 

Where are you in your retirement journey? Do you wish you learned this sooner or are you pumped to get started right away? Let me know in the comments!

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