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Want a $1 Million Nest Egg? Here's the Monthly Retirement Plan Contribution That Could Pull It Off

By Maurie Backman – Sep 2, 2021 at 5:36AM

Key Points

  • It's important to kick off retirement with a healthy nest egg.
  • Some people have the goal of retiring with $1 million.
  • You may be able to hit that goal with a modest monthly retirement plan contribution -- if the circumstances align properly.

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You may be surprised at how easy it is to grow long-term wealth.

Many people dream of retiring with $1 million or more to their name. Now the reality is that you don't really have to fixate on a $1 million nest egg. You may be able to do just fine in retirement with less savings, or you might need a lot more. But if you do want to hit that $1 million goal, then it'll help to know how much money you need to sock away each month in a retirement savings plan to make that happen.

Of course, there's no easy answer to that question, as it will depend on variables such as the length of your savings window and the way you actually invest your money. But you may be pleasantly surprised to learn that it's possible to retire with a $1 million nest egg by setting aside just $300 a month in your IRA or 401(k) plan. Here's how.

Two people looking at a document on a table.

Image source: Getty Images.

How to grow $300 a month into $1 million

Before we go any further, let's be clear about one thing. Funding your retirement plan with $300 a month will not guarantee you a $1 million nest egg. The point here is to illustrate that it's possible to turn a series of $300 monthly contributions into $1 million.

But let's focus on that possibility and how to get there. Many people start working full-time in their early 20s and don't retire until their late 60s. If you follow a similar pattern, you may have a 45-year savings window to take advantage of.

Meanwhile, if you invest your retirement plan heavily in stocks, there's a reasonable chance that over that lengthy savings window, you'll end up generating an average annual 7% return in your IRA or 401(k) plan. That 7% is a bit below the stock market's average. Assuming a 45-year savings window and that 7% return, you could retire with a little more than $1 million.

Of course, things start to shift when you shrink your savings window. Saving $300 a month in a stock-heavy retirement plan over 35 years, not 45, will leave you with about $500,000 in savings, even if you manage to eke out a 7% average annual return during that time.

But if you're already a decade into your career and have yet to start funding an IRA or 401(k), you can compensate by making larger contributions. Setting aside $600 a month in your retirement plan over 35 years will give you about $1 million if you manage to snag that 7% return.

The takeaway here? It doesn't necessarily take a ton of money on a monthly basis to wind up a retirement millionaire if you invest wisely and give yourself enough years to fund your IRA or 401(k). If you're getting a later start to saving, be realistic and plan on parting with more money each month. Otherwise, $300 a month may very well do the trick if you think you'll be satisfied kicking off your senior years with $1 million to fall back on.

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