Class of 2015: This Is Your Best Shot at Retiring a Millionaire

To the young adults graduating in 2015: Congratulations! You have an incredible future ahead of you. Though you're probably just looking to start your career, right now is an incredibly important time to consider the end of that career. As a new graduate, you're in the position to make choices that will dramatically increase your chances of retiring a millionaire.

You have three key advantages over your older coworkers that give you a tremendous leg up in retirement funding -- but you must take advantage of them now, or they will vanish. Those advantages are:

• Your time
• Your ability to live like a broke college student
• Your probable lack of huge financial obligations like a mortgage, kids, or serious health concerns

If you fully leverage those advantages now, you'll be amazed at how prepared you are to retire in comfort decades down the road.

Make 2015 your millionaire year
In 2015, people under age 50 with earned income are generally eligible to contribute $18,000 into their employer-sponsored 401(k) or similar retirement plan. Those same people can also contribute an additional $5,500 into their individual retirement arrangement. That's $23,500 you can potentially sock away into qualified retirement plans this year for your retirement.

As crazy as that may sound, given that you're just starting your career, there's a great reason to consider socking that much away if at all possible. That single year's maxed-out contribution, made early and invested successfully throughout your career, could potentially make you a millionaire in retirement all by itself. The table below shows a range of potential retirement fund values based on that single investment, the number of years you allow it to grow, and your rate of return.

Source: Author's calculations. 

The stock market's long-run compounded returns have been near 10%. While there are no guarantees in investing, if that trend holds up throughout your career, that single year's investment could be worth far more than $1 million by the time you're ready for retirement. That's an incredible incentive to stretch to make that contribution.

Leverage your other strengths to take advantage of that time
As challenging as it may be to make that kind of contribution when you're just starting out, remember your other advantages over your older coworkers. You're used to living like a broke college student, and with the possible exception of student loans, you probably don't have huge expenses already embedded in your budget.

As you start to join the "real world," consider making some of the lifestyle choices you might have made while you were in school:

• Live with a roommate to keep your rent and utilities manageable.
• Drive a reliable used car to avoid car payments, or rely on public transit if feasible.
• Look for budget-conscious meal choices and get clever with leftovers.
• Know what indulgences you can live without, and live without them.
• Keep your wardrobe simple, functional, and practical for your chosen career.

The lower you keep your costs, the easier it will be for you to reach that $23,500 contribution. And remember: That contribution is a one-year sacrifice that, made early enough in your career, could help you retire as a millionaire all by itself.

If you can't max out your plans, it's still worth saving early
Despite your best efforts, saving $23,500 within a year may be impossible on your entry-level salary. Even then, it still makes sense to live inexpensively and start saving aggressively for your retirement. If you want to wind up a millionaire by the time you retire, getting an early start makes it a whole lot easier.

The table below shows why. It indicates the number of years it will take for you to amass $1 million depending on how much you can sock away each month and what rate of return you earn:

Source: Author's calculations. 

There's a clear trade-off between the amount you sock away and the length of time it will take for you to reach that $1 million target. This matters to you as a new graduate for two reasons.

For one, the earlier in your career you start investing for your retirement, the less you have to sock away each paycheck -- and in total -- to wind up a millionaire.

Secondly, consider what happens if you don't get started early. If you think it's hard to come up with $250 or $500 per month early in your career, imagine how hard it will be to go from saving $0 to saving $1,250-plus per month to get to millionaire status if you start later -- especially considering that you may later have a mortgage, a car payment, and kids.

All at once or a little each month -- either path is open to you
As a new grad, with your entire career ahead of you, you have the opportunity to build a comfortable retirement that your older coworkers can only dream of. Whether you try to get there in one fell swoop or over time, the choice is yours. Just don't let that choice be taken away from you by delaying saving for your retirement.

So, class of 2015, take this opportunity to think about what will happen at the other end of your fledgling career. Start your retirement plan now, and you'll find your journey much easier.