Nearly everyone dreams of one day becoming a millionaire, and most people think that to achieve that status, you'll need to win the lottery, get lucky on a game show, or inherit a fortune from a rich relative.

However, it's possible to save $1 million by the time you retire -- even if you're not super wealthy to begin with.

Jar full of hundred-dollar bills.

Image source: Getty Images.

One out of every six retirees is a millionaire, according to a recent report from United Income, a number that has more than doubled since 1989. While part of that might be due to inflation ($1 million isn't worth as much now as it was nearly 30 years ago), the report also revealed that average wealth among American retirees has increased by a whopping 100% since 1989.

While not everyone will be able to save that much by the time they retire, it is possible even if you don't have a winning lottery ticket. The keys are starting to save as early as possible and not playing it too safe with your investments.

The early bird gets greater returns

It's never too late to start saving, but the earlier you begin, the easier it will be to see significant gains. That's because with compound interest, your money grows exponentially faster the longer it has to accumulate interest. Also, when you start saving early, you don't need to save as much each month to reach millionaire status by the time you retire.

For example, say you're 25 years old and can't afford to save much -- just $100 per month. If you were to continue saving at this rate while earning a 7% annual rate of return on your investments, you'd end up with nearly $250,000 by the time you turn 65.

No, it's not $1 million, but it's unlikely you'll be saving just $100 per month the rest of your life. So instead, let's say you increased your contribution by $400 per month every 10 years. (It sounds like a lot, but if you break it down by year, that comes out to boosting your monthly saving by just $40 each year.) Assuming you're still earning a 7% rate of return, here's what your savings would look like over time:

Age Monthly Contribution Amount Total Savings
25 (Today) $100 $0
35 $500 $17,202
45 $900 $119,848
55 $1,300 $390,576
65 -- $991,947

Source: Author's calculations.

Also, if your employer offers matching 401(k) contributions, it will be easier to reach the $1 million mark without having to save quite so much on your own. Depending on how much your company will match, you could potentially double your savings without any extra effort on your part.

For instance, say you're earning $50,000 per year and your employer will match 100% of your contributions up to 3% of your salary. That amounts to $1,500 per year, or $125 per month. And that $125 per month can go a long way when you're contributing $500, $900, or $1,300 per month to your 401(k). This also assumes that your salary remains stagnant over time, when in reality, you'll likely be receiving salary increases the older you get, meaning your employer will be contributing more as well. 

Fewer risks mean fewer rewards

The second component to working your way to $1 million is to avoid playing it too safe with your investments. While it can be tempting to stick to more conservative investments -- like bonds, money market funds, and CDs -- it will be far more difficult to reach $1 million unless you save dramatically more money each month.

For example, say you have your money placed in more conservative investments, and you're earning an annual return of 2%. Using the same figures from the last example, here's how much you'd have to save each month to see roughly the same gains as if you were earning a 7% annual return:

Age Monthly Contribution Amount Total Savings
25 (Today) $130 $0
35 $740 $17,266
45 $1,850 $119,331
55 $3,900 $391,173
65 -- $994,819

Source: Author's calculations.

The difference between a 2% return and a 7% return on your investments might not seem too drastic, but it could be the difference between saving $1,300 per month at age 55 and saving $3,900 per month at age 55.

However, it's also important to not get too wild with your investment choices either. You might want to invest your savings in that hot new stock that you think will become the next multibillion-dollar brand, but it's not the wisest idea to bet your retirement on it. Instead, focus on the more reliable investments, like low-cost index funds and mutual funds. You'll still see the benefits of investing in stocks, but you can limit your risk by investing in dozens (or hundreds) of different stocks at a time rather than a select few.

Becoming a millionaire by the time you retire isn't easy, but it's also not as challenging as you might think. If you get started early, save consistently, increase your contributions regularly, and make smart investing choices, you can be well on your way to joining the elite millionaire club.

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