Kiplinger’s Personal Finance Magazine has some suggestions for saving a million dollars regardless of your age. The only catch is that it’s going to take several decades to get to that point. The passing time has a detrimental effect, however. Inflation will eat away at your purchasing power so $1,000,000 thirty years from now will not be as useful as $1,000,000 now. Regardless, taking these thoughts into account is better than doing nothing.
At Age 35
* Save 15% of your gross income. In addition to whatever short-term savings goals you might have, like a down payment on a house or preparing for children, 15% of your gross income should be saved for your long term retirement goal. Kiplinger’s calculates you’ll need $671 per month invested in the stock market if you’re starting from scratch at this age.
* Shift your assets to 90% stocks and 10% bonds. I think this recommendation could be misleading. I think your assets must be separated into buckets for specific goals, and then the asset allocation must be tied to the time horizon for those goals. For instance, at age 35, it will still be several decades before you can use your retirement funds. I would keep them in 100% stocks (or close to it). Savings intended for a house down payment should be in bonds, CDs, or cash, depending on how soon you’ll need the money. Overall, this could look very different than a 90/10 mix.
* Invest in a 529 college-savings plan. I’m not sure that this piece of advice can be as universal as the magazine suggests. Not everyone has children or other relatives who will be attending college. It’s a good idea for those who are already on a clear path of having a secure retirement and who have family members who can benefit from the tax-free distributions from a 529 plan.
The monthly $671 you’ll need to devote to retirement assumes you have no savings. If you’ve managed to save $50,000 for retirement by age 35, then you’ll only need $304 each month, less than half. But if you can manage the higher amount, I would strive for that.
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How to Make a Million at 35 [Kiplinger's Personal Finance]
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