Are you on track to save $1 million?
Many retirees who become millionaires take a long time to do it, working diligently over their career to invest for their future. Whether you're on track to be one of them or not depends on how old you are and how much you're currently saving.
Here are a few scenarios showing what’s required of folks, in various life situations, who want to build a seven-figure nest egg, assuming a 7% annual return.
- If you're 25 and just getting started, you'd need to save $361.32 monthly until retirement to be a millionaire at 67 (Social Security's full retirement age)
- If you're 35 and just getting started, you'd need to invest $756.07 monthly until 67
- If you're 45 with $50,000 invested, you'd need to invest $1,323.79 per month
- If you're 55 with $400,000 invested, you’d need to invest $461.77 per month
Investor.gov has calculators to help you see if you're personally on track given your age and current investments.
The key takeaway is that it is much easier to become a millionaire if you start saving early. The more time you can allow for compound growth, the less money you have to invest each month to reach your retirement savings goal.
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Read MoreWhat can you do if you're falling behind?
If you aren't on pace to become a millionaire retiree, you can still work towards becoming one. Following the commonly-used 4% rule to determine a safe withdrawal rate, a $1 million nest egg would produce $40,000 in annual income. Falling far short of this goal can lead to financial trouble.
To catch up, you must take retirement savings seriously by treating it as a must-pay bill just like your rent or groceries. After all, the savings you're putting aside now is what's going to enable you to cover your rent and food costs later once you're no longer getting a paycheck.
Calculate the amount you must invest using a savings goal calculator and adjust your budget, making cuts as necessary or increasing your income with a side hustle to hit your target number. Have the money transferred automatically to a tax-advantaged retirement plan so you can be sure it's invested every month.
If you have access to a 401(k) match, you should enroll. You may earn an employer match, in addition to tax breaks for investing. For those without a 401(k), an IRA can provide comparable tax benefits. You can arrange for your brokerage to take automatic contributions from your bank account.
Don't wait to get started. Becoming a millionaire is a worthwhile goal that can help to ensure a comfortable retirement.
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