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Want to Become a Millionaire Well Before Retirement? 3 Key Moves to Make

By Maurie Backman - Mar 16, 2021 at 6:04AM

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If you want to amass $1 million as early as possible, here's what you'll need to do.

Many people save and invest all of their lives so that by the time they're set to retire, they have $1 million or more in their 401(k) or IRA. But while attaining millionaire status in time for retirement is a noble goal, what if you'd rather get there sooner? With the right strategy, it's more than possible. Here's what you'll need to do.

1. Save from an early age

For growing wealth, time is an extremely valuable weapon. In fact, one reason so many people retire as millionaires is that they give themselves 40 years or more to hit that goal. If you want to become a millionaire by, say, your 40s, you'll need to get into the habit of saving from an early age -- ideally, as early as your first paycheck. But if you start working in your early 20s and want to reach millionaire status by your late 40s, that still gives you a good 25 years to invest.

Man counting hundred dollar bills

Image source: Getty Images.

2. Save consistently

In the course of your life, you may run into periods when it's not so easy to save or invest. Home repairs, for example, could wreak havoc on your budget, while the desire to reward your hard work with vacations could throw your long-term efforts off course. If you want to become a millionaire well ahead of retirement, you may need to make some sacrifices, but if you're willing to do what it takes to save consistently, you'll be more likely to achieve your goal.

3. Invest aggressively

Playing it too safe with your investments could leave you short of your ultimate wealth target. As a general rule, it pays to invest in stocks for boosted returns, even if that means stepping a bit outside your comfort zone. If you stick to bonds, your portfolio might fluctuate less wildly through the years, but you may have a far more difficult time accumulating $1 million or more.

Imagine you save $1,000 a month over a 25-year window, and you invest that money largely in S&P 500 stocks or index funds. Over the past 30 years, the S&P 500 has averaged around 12%, but let's be a bit more conservative than that and assume your portfolio generates a 9% average annual return instead. All told, you'll end up with just over $1 million without having to take on a crazy amount of risk (after all, the S&P 500 is a well-established index, and investing in it is a very reasonable route to take).

Now, let's watch what happens when you go heavy on bonds instead. Even if bond yields climb, you may only see a 5% average annual return over time (and that's being generous). With a $1,000 monthly investment over 25 years, that would leave you with about $573,000 -- a nice chunk of money, but clearly nowhere close to $1 million.

It's one thing to become a millionaire in time for retirement, but it's another thing to hit that goal well ahead of your senior years. If the latter is important to you, you now know what you need to do to make it happen.

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