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5 Ways to Earn $1 Million Before You Retire

By Chuck Saletta – Updated Sep 27, 2021 at 12:59PM

Key Points

  • You can save a lot, or you can invest consistently over time.
  • The sooner you get started, the less you have to sock away each month to get there.
  • If you can't get to your target savings rate all at once, start with something and then build from there as you're able to.

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Not everyone's path to millionaire status will be the same. Pick a path that works best for you, and improve your chances of getting there.

Although $1 million may not be worth as much as it used to be, it's still an incredibly important milestone for people who manage to reach it. When you also consider that it's about four times the median net worth of people around retirement age, it remains an aspirational target worth seeking out.

Because there are certainly no guarantees that you'll reach that $1 million target, it makes sense to consider multiple approaches that could help you get there. With that in mind, here are five ways to earn $1 million before you retire.

Senior couple walking on the beach holding hands.

Image source: Getty Images

1. Save $20,000 per year for 50 years

With even fast-food jobs offering a fairly quick potential path to a six-figure salary these days, it becomes possible (albeit tougher than it really needs to be) to reach that $1 million mark through savings alone. Saving $20,000 per year for 50 years will get you there, even if you get absolutely no return on your money.

That said, following a path like that would require starting work at 18, quickly ramping up to that high-paying role, and staying in it until you were somewhere in the neighborhood of age 70. While that's technically possible, it's certainly not an ideal path to millionaire status. After all, you're getting no return on your money, while still leaving it all exposed to the ravages of inflation  over time.

2. Invest $7 per day for 40 years

A much more achievable approach, even for folks of modest means, is to start investing early. If you start early enough in your career, reaching millionaire status by retirement is within the realm of possible even for folks who earn the minimum wage over the long term.

Assuming you receive around a 9% annualized rate of return on your investment, socking away just $7 every single day will get you to millionaire status within 40 years. That 9% is roughly in line with the market's long-term returns, but those returns are not guaranteed. In addition, $7 a day might seem like a reasonable amount, but $7 a day every day for 40 years is a significant, long-term commitment.

3. Target socking away $1,500 per month for 20 years

In a typical career trajectory, people start out in entry-level roles, then earn higher salaries and more responsibilities as they gain experience over time. As a result, if you can keep your costs of living fairly consistent as your career progresses, you can find yourself with more available money as you approach the middle of your career than at the beginning of it.

With that in mind, if you can sock away $1,500 per month for 20 years and earn that same 9% annualized rate of return, you can end up with $1 million by the time you retire. If you're just starting out, that amount can seem like a huge hurdle. As you get past your start-up costs, knock down any high-interest consumer debt, and see your salary increase over time, it can get closer to achievable.

Just recognize that a rapid transition from saving nothing to finding around $50 a day to invest can be fairly jarring. As a result, this strategy is really only feasible for those who are already approaching the middle of their careers and who recognize the need to make an intervention. If you're earlier in your career, one of the next couple of options could be a better fit for your time frame.

4. Automatically invest 10% of your salary, starting with your first paycheck

Many companies offer a 401(k) or similar plans that allow employees to automatically invest a certain percentage of their salaries, every paycheck, toward their retirement accounts. With the average college graduate getting around $55,260 as a starting salary, a 10% contribution works out to a decent $5,526 per year, or $460.50 per month.

Invested at around a 9% annualized return, that will get you to millionaire status in just under 32 years. Beyond that simple math, there are two key advantages to this approach. First, because it's coming straight out of your paycheck, you'll be less likely to miss the money, as you'll never see it in a spendable form.

Second, by tying your contribution to a percentage of your salary, the amount you save will increase as that salary does. This gives you the opportunity to reach that $1 million milestone a bit faster than you would by holding your contribution at a constant dollar amount throughout your career.

5. Start small, and invest half your raises

If you can't get to any of these other targets yet, one other strategy that could work for you is to start by investing what you can now, and then increase your contribution by half of every raise you get. In addition, as other boosts come your way (such as when the tax brackets adjust for inflation), investing half them can get you closer to your goal as well.

After all, if you were making ends meet on your salary before those wage boosts, then technically, you don't need the money from those boosts to cover your costs. So why only half? Well, for one, inflation is a real thing, and you'll need something to cover those increased costs over time. For another, increased income often comes with increased taxes, and you'll certainly need to pay those as well.

By targeting half of your boosts, you have a reasonable opportunity to at least keep your lifestyle whole while both covering the related taxes and fighting a bit of inflation over time.

Given the reality that it's hard to predict your raise amounts and timing, there really isn't a simple formula for when you'll reach millionaire status with this method. As a result, you'll want to regularly check your savings amount and progress.

Get started now

Ultimately, getting yourself to invest and make progress toward the goal as quickly as you can is the most effective step on your quest to reach a $1 million nest egg by the time you retire. Once you're on a path to get there, it's easier to make small adjustments along the way than it would be to wait longer and ultimately need to sock away more each paycheck to have any chance of success.

So pick whichever of these five approaches works best for your personal circumstances (or adapt one to work better for you) and get started now. The more time you have on your side, the easier it is to reach that $1 million milestone by the time you retire. You'll never again have more time before you retire than you have right now, so make today the day you start down the path to a $1 million nest egg.

Chuck Saletta has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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