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How to Retire With $1 Million on a $50,000 Salary

By Katie Brockman - Updated May 5, 2021 at 5:04PM

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Retiring a millionaire may be within reach, even if you're not already wealthy.

It's no secret that many workers are falling behind on their retirement savings. The average 401(k) balance is around $109,600, according to a 2020 report from Fidelity Investments, while the average IRA balance is slightly higher at $117,700.

To retire comfortably, though, you'll likely need several hundred thousand or even $1 million in savings. Retiring a millionaire may seem impossible if you're not wealthy, but it can be done -- even if you're earning an average salary.

Senior man throwing dollar bills into the air

Image source: Getty Images.

Setting the right goals

Preparing for retirement is never easy, but getting started is often the hardest part. To save as much as possible, it's best to start investing early in life and be consistent about it.

Even if you can't afford to save much, starting to invest earlier in life can help you reach millionaire status someday.

Say, for instance, you are just starting to save for retirement, and you have 35 years left to prepare. Let's also say you're earning a modest 8% average annual rate of return on your investments. (Keep in mind that this number is an average over time, so you won't necessarily earn an 8% return each and every year.)

If your goal is to save $1 million by retirement age, you'd need to invest around $500 per month in this scenario. If you're earning $50,000 per year, that's around 12% of your salary. Most experts recommend setting aside around 10% to 15% of your income for retirement, and $500 per month is within those guidelines.

What if you're falling behind on your savings?

Not everyone has 35 years to save for retirement, but that doesn't necessarily mean you need to give up on your goal of retiring a millionaire. However, if you're off to a late start, you will need to get creative with your strategy.

If you have access to employer matching contributions through your 401(k), maxing those out should be your first priority. Matching contributions are essentially free money, and they can make it easier to achieve your goal.

For example, say you have no retirement savings and only 25 years left to prepare, but you still want to retire a millionaire. Assuming you're still earning an 8% average annual return on your investments, you'd need to invest around $1,200 per month.

But let's also say your employer will match your 401(k) contributions up to 3% of your salary. If you're earning $50,000 per year, that's $1,500 per year in matching contributions, or $125 per month. Instead of having to save $1,200 per month on your own, then, you just need to contribute $1,075 per month while receiving an extra $125 per month from your employer.

Jar full of hundred dollar bills

Image source: Getty Images.

Of course, investing $1,075 per month is still hard work. It comes out to around 25% of your salary if you're earning $50,000 per year, which is a good chunk of change. If saving that much isn't feasible in your situation but you're determined to retire a millionaire, you may consider pushing retirement back by a few years to give yourself more time to save -- which means you'll need to save less each month.

Keep in mind, too, that as you get older, your salary will likely increase. Because most employers match a percentage of a worker's salary, that means you'll be eligible to receive more in matching contributions as your income increases. That, in turn, will make it easier to reach your saving goals.

Retiring a millionaire isn't easy, but it can be done. By starting to invest as early in life as possible and continuing to invest consistently, it's possible to become a millionaire on an average salary.

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