How to Save a Million Dollars in Your 30s, 40s and 50s
What is your ideal amount to save for retirement, or how much money would you need to have before you consider yourself financially secure? For many people, it’s crossing that threshold into “millionaire” status. But can you reach that goal, no matter how much you make and when you get started?
Lucky for you, the answer is a resounding “Yes!” With the right financial moves and dedication to your goal, you can put yourself on track to become a millionaire, regardless of your age.
Here’s a look at how you can easily reach a seven-figure status in your 30s, 40s, and even 50s, and why there’s nothing wrong with starting today.
It’s Not Too Late to Start
I grew up believing that becoming a millionaire was the ultimate financial goal. It not only sounded cool, but those seven figures seemed like more than enough money to live off of for life. As I’ve gotten older, I’ve realized that a million dollars don’t quite go as far as 10-year-old me once believed. I still long for the day that my net worth requires two commas, though it’s now more out of necessity than “cool factor.”
I don’t have a job with a ridiculously high salary (Hello? I’m a writer/editor… my income doesn’t exactly have me swimming in extra cash). I wasn’t born with a trust fund, don’t have rich (elderly) relatives, and I’m already well into adulthood without hundreds of thousands of dollars squirreled away. Because of this, I once believed (a few short years ago) that I never had any hope for reaching $1,000,000.
The reality is, it’s never too late–or impossible–to become a millionaire.
Yes, the later you start, the harder you will have to work in order to save up those seven digits. It will take more dedication, more commitment, and, barring some unplanned influx of cash, more saving of your monthly income in order to reach that goal. However, whether you’re 35 or 53, putting aside a million dollars is absolutely still within your reach.
Let’s talk about what it actually takes to save this much money by age 65, depending on when you begin.
Starting In Your 30s
If you are 30 years old, you have an advantage in the saving-a-million-dollars game: time. Thanks to the compound interest and your ability to be a bit more aggressive in the market, you can save less money than your older counterparts and still hit the same goal. And this is true even if you’ve reached your 30s without setting aside a single dollar in savings.
If your goal is to be a millionaire by retirement (we are using age 65 in these examples) you will have 35 years to save and ride out your investments. While this isn’t as ideal as if you’d started saving in your teens or 20s, it’s still a great position to be in.
We used an investment calculator that accounts for a 7% return on investment, federal taxes, and inflation to run the numbers. With that, we found that you would need to put aside $581 a month in order to cross the $1,000,000 mark before age 65.
Of course, this is just a guess, as no one has any idea what the market will do between now and then. You may very well earn 20% returns over the years, and make it to a million bucks long before you clock out for the last time! However, accounting for market averages, this is the amount you should aim to save monthly.
What if you already have a little bit of money set aside when you begin this road-to-millionaire mission? If you have, say, $50,000 in retirement savings when you start, you will only need to put away $271 each month in order to hit a million before age 65. Sounds a lot easier, huh?
If you are in your 30s, you have the advantage of compound interest on your side, in addition to time. Since you have longer to save before living off of that money, you can also take bigger risks. In the investment world, bigger risks mean the chance for bigger returns.
Because of this, you want to ensure that you balance your portfolio accordingly. In your 30s, you will want a mixture somewhere around 90% stocks and 10% bonds, which you will slowly rebalance as you get older. This will allow you to maximize returns, while still minimizing risk as the time draws near for you to retire.
Starting In Your 40s
By the time you reach your 40s, you are probably pretty established in your career. You may be looking forward to the next couple of decades, and even thinking about what retirement will look like for you.
If you’re just starting your journey to $1,000,000 before 65, you will have a little catching up to do. Fortunately, this goal is still more than possible to reach. It just might be a bit more of a challenge!
Back to the investment calculator, we mentioned earlier. If you’re just beginning your savings journey at age 40, starting from $0, you’ll need to save a bit more each month in order to hit a million dollars by age 65. You have 25 years to save; assuming a 7% annual return and taking into account both taxes and inflation, you would need to invest $1,270 a month.
Let’s instead say that you’re not starting from zero, and already have $50,000 tucked away. In that case, you will only need to put aside $926 per month for the next 25 years. This makes your savings efforts even easier if you want to reach a million dollars before you hit retirement.
Of course, you’re closer to retirement than if you’d started saving in your 30s, so you’ll need to be more cautious with your portfolio. You can still afford to be a bit risky, though, as you do have two-and-a-half decades before you’ll need to use your money. By starting with a higher balance of stocks than bonds now, and then adjusting more toward bonds as you near retirement, you can both maximize returns and mitigate risk.
Starting In Your 50s
Once you reach your 50s, you are probably planning for retirement more seriously. You may have already determined when you will call it quits with your career, how much money you’ll need to cover your expenses (like healthcare), and even what you’ll do with all of that extra time.
While your 50s are not the ideal time to start saving to become a millionaire, this doesn’t mean it’s impossible. Sure, it’ll be a much bigger challenge than when you were a decade or two younger, but if you’re dedicated to reaching that goal, you can definitely find your way to seven figures.
If you’re starting from zero, you should plan to set aside quite a bit of your earnings each month. Assuming the same 7% return on your investment, you would need to invest $3,200 a month in order to meet your retirement goal of $1,000,000. If you were instead starting from the same $50,000 used in the other examples, you would only need to save $2,756 per month, and you would still meet your goal by age 65.
Of course, the biggest problem with starting your journey to millionaire status in your 50s is that you are much closer to retirement. This means that you will need to be more cautious with your portfolio balance, opting for more bonds than stocks and not making riskier (read: more lucrative) investment choices. After all, you can’t really afford to risk a big market slump, as you won’t have as many years for your investments to recover.
You’ll need to save more and you can expect your returns to be a bit less.
Adjusting Other Savings Goals
The approach you take when setting a lofty financial goal–like becoming a millionaire–changes based on your situation. And depending on your age, other life goals, and even your family situation, you may need to save even more than mentioned above.
If you have children, you may want to put aside some money each month for their education. If you’re younger, you might have plans to buy a home for your family later down the line, and want to start saving for a down payment. These other savings goals are significant, and you may have to decide where your priorities lie.
If you’re 50 and just starting to save for retirement, it may be time to be a bit selfish. While you might want to still pay for your children’s college educations (assuming they haven’t reached that age yet), you also need to consider your impending retirement and the needs that will bring. If that means telling your kids that they will need to cover their own education (or at least most of it), that’s understandable. After all, saving enough to survive retirement is an imperative goal.
Whether you want to become a millionaire because you believe that’s how much money you’ll need in retirement or you just think it sounds cool, there’s nothing wrong with setting that goal. It is important, however, to start as early as you can. By doing so, you can not only reduce the amount of money you’ll have to save each month, but you can also focus your efforts on other savings goals along the way.
The best time to start saving for retirement was a decade ago. The next best time is today, especially if you’re attempting to become a millionaire in the process.
Going paycheck to paycheck.
How can i save? I have credit card debt and student loans.
This online spreadsheet will allow you to figure out how much you will need to accumulate, taking inflation into account.
I still don’t understand why having a 529 plan is part of retirement. I don’t plan on going to school when I retire, and saving for your kids will only kill your retirement account.
Maybe one day I’ll be in a position to pay for my children’s education, but until then they can work a job and get student loans just like me (or be smarter and get grants and scholarships).
Experience is teaching me that it is all about properly investing. I bought 2 homes after investing about 50K in each home. and now those two homes lost this whole value 100K and now still going down. However, I also invested 75K in my own country and there the values raised to 300K in just 5 years. So, I am thinking that US is not a very good destination for savings. So, what I suggest is the following.
1. Buy a home, which is enough for you now, for which you can put 20% down payment. This will reduce your tax rate and you can enjoy your own house.
2. Put money in stocks in emerging markets like India, China, Philippines, Russia etc… you can put it in the mutual funds representing those countries.
3. As everybody says, keep 3 months of emergency funds and put them in a CD.
4. Be vigilant on the investments you are making and once any investment gives you more than 20-25%, just come out of that.
5. Never go for huge debts.
I am 5 years past the 35 y.o. mark, but I have already been planning on at least $2m to retire on due to inflation eroding away the value of a dollar.
When I initially read the post, I thought to myself…how does this make any sense? I’m putting up $2000+ per month in savings and am still not sure it’s enough!
I then read the reader comments and really appreciated the feedback about inflation, and Dan’s in particular, which gave us some real numbers. I think it’s a very significant omission not to highlight this in the article. In fairness, given the personal savings rate in our country, amassing $1,000,000 dollars at 65 still may be quite an accomplishment for many. However, as Dan pointed out, it’s hardly the same million dollars that people may be expecting…and far far away from what I am personally targeting for my own retirement.
Inflation is not a mere side note. If inflation continues its long-term average, your $1,000,000 in 2038 dollars is equivalent to $363,583 in today’s dollars. To have what is equivalent to $1M today, you need to accumulate $2.75M in 30 years. With Kiplinger’s 8% APY, that means you’d need to save $1,845 per month. Those would $50,000 already saved would need to add $1,478 each month to reach inflation-adjusted millionaire status. These numbers are the truth, unfortunately they don’t sell magazines.
If you are 35 you should be able to have more than one million at retirement. It will just take some will power and ingenuity.
I have a similar post about this Kiplinger’s article on my blog. I was thinking about that same thing when reading it, however – just how much inflation will hurt that money – how much will 1 million be worth when i’m 65? good point.