How Anything But Land A Millionaire Retirement | Smart Change: Personal Finances

(Chuck Saletta)

Despite the runaway inflation we all feel today, $1 million is still a lot of money. Indeed, that’s almost four times the median household net worth of people nearing retirement age. As a result, even today, a million dollar nest egg, combined with Social Security and Medicare, should be enough for a reasonably comfortable retirement in most parts of the country.

That makes a $1 million nest egg a great goal to aim for. Of course, since it’s so far ahead of the median focus, that’s obviously easier said than done. There are no guarantees when it comes to investing, but there is a simple three-step approach that can help you do anything but land that millionaire retirement.

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Step 1: Start early

The sooner you start building your retirement nest egg, the easier it will be to reach that $1 million balance. That’s because compounding tends to have a bigger base to work from as long as you let it work its magic. The following graph shows the potential growth of a single $10,000 investment over time, depending on the rate of return you earn and the number of years you let it accumulate.

Number of years compound

10% annual return

8% annual returns

6% annual returns

4% annual return































This early money can really make a difference to your net worth when you retire. Just look at this top row which shows how much your single investment can grow if you store it and leave it alone for pretty much your entire career.

Step 2: Invest regularly

Of course, if you’re well past the point where you have more than four decades to wait until retirement, the chance to put that money to work early may be behind you. The good news on this front is that you could still have a decent chance of landing that millionaire retirement by investing regularly.

By making regular investments each payday, each investment has the opportunity to accumulate between the time you make it and the time you need to tap into it for your retirement. The following table shows how much you should invest each month reach $1 million at retirement, depending on the number of years you have to invest and the rate of return you earn.

Years to come

10% annual return

8% annual returns

6% annual returns

4% annual return































While there’s always a huge upside to starting early, the good news here is that mid-career professionals still have a good shot at landing that millionaire retirement. Be warned, however, that time can quickly start working against you.

Look at how much you need to save each month if you start saving with ten years or less before retirement. If you thought to swallow some hundred a month at the beginning of your career was difficult, try to go from 0 $ to a few thousand later in your career. So while investing consistently is essential, starting as early as possible increases the chances of reaching your goal.

Step 3: Buy long-term stocks

Although the first half of 2022 reminded us that stocks can go down as well as up, over the long term, there is still good reason to believe that stocks can be a great tool for creating wealth. That 10% return column on the left side of these two charts is there for a reason. This is roughly in line with overall long-term historical stock market returns. Stock returns are never guaranteed, but it’s certainly good to know that these numbers are all in line with what history suggests is within the realm of possibility.

Regardless of the future of the market, a great approach to buying stocks is to buy a low-cost, broad-based index fund. These types of investments are widely available at brokerages and in many employer-sponsored 401(k)-type plans. They offer market-like returns with almost no overhead, and best of all, they tend to beat the most actively managed mutual funds over time.

This means that one of the easiest ways to buy stocks is also one of the best. Over time, investing in broad index funds on a regular basis gives you an excellent chance of anything but landing that millionaire retirement.

Start now

When it comes to saving for retirement, whatever your personal goal, the earlier you start, the more time you have for yourself. So make today the day to put your plan in place and increase your chance of reaching that million dollar nest egg when you retire.

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Chuck Saletta has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

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