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Is It Really Possible to Retire a Millionaire on an Average Salary?

By Katie Brockman - Jan 15, 2021 at 7:15AM

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See how much you'd need to save to retire a millionaire.

With living expenses increasing and older Americans enjoying longer lifespans, it's possible you may need at least $1 million to retire comfortably. But if you're earning an average salary, retiring a millionaire may not seem feasible.

Fortunately, it's possible to retire with at least $1 million even if you're not wealthy. By starting relatively early in life and saving consistently, it's easier than you may think.

How much do you need to save?

The key to saving $1 million by retirement age is starting to save as early as possible. It takes decades to accumulate a significant amount of savings, and the sooner in life you get started, the easier it will be to reach this target.

Young woman putting a dollar bill into a piggy bank

Image source: Getty Images.

The average worker started saving for retirement at age 31, according to a survey from the Nationwide Retirement Institute. Say you began saving at this age and you plan to retire at 67 years old. Let's also say you're earning a modest 8% annual rate of return on your investments.

At this rate, you'd need to save around $450 per month to retire with at least $1 million. That may sound like a lot, but considering the median wage in the U.S. is around $48,000 per year, that $450 per month comes out to just 11% of the average worker's salary.

Also, keep in mind that if you have access to employer matching contributions with your 401(k), this money counts toward your goal, too. Say, for instance, your employer will match your savings up to 3% of your salary. That amounts to $120 per month -- meaning that of your $450 per month goal, you'd only need to contribute $330 each month out of your own pocket.

What if you're off to a late start?

If you have several decades left to save, it's easier to accumulate a substantial amount of money. But what if you're past your 30s and still want to retire a millionaire?

The good news is that it's still possible to retire with $1 million if you're off to a late start. The not-so-good news, though, is that you'll need to save more each month.

Say, for example, you're 40 years old and want to retire at age 67 with $1 million. Assuming you're still earning an 8% annual return on your investments, you'd have to save just over $950 per month to reach that goal. If you're earning a salary of $48,000 per year, that comes out to close to 24% of your wages.

For many workers, putting nearly a quarter of their income toward retirement simply isn't realistic. In this case, you have a few options: delay retirement, find another source of income, or rethink your retirement expectations.

Delaying retirement will give you more time to save, but be honest with yourself about how long you'll realistically be able to work. Picking up a second job can help boost your savings, as long as you're willing to put most or all of that income toward your retirement fund. And by rethinking your retirement expectations, you can potentially reduce your future expenses so you don't need $1 million to enjoy your senior years.

Retiring a millionaire requires a thoughtful strategy and consistent saving, but it can be done. By determining how much you need to save and starting to prepare for retirement as early as possible, you can give yourself the best chance of retiring with at least $1 million.

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