Though age 65 is not full retirement age for Social Security purposes, it's an age that many people associate with retirement. Age 65 is when seniors become eligible for health coverage under Medicare. And it's also the age when a lot of senior discounts kick in.
As such, you may have the goal of retiring at age 65, whether in conjunction with claiming Social Security or not. If you're hoping to leave the workforce at age 65 with a million-dollar nest egg, here's what it will take to get there.
Set yourself up for success
The idea of accumulating $1 million or more for retirement might seem daunting -- because clearly, that's a large amount of money. You may have an easier time reaching that goal by setting a monthly savings target.
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How much of a monthly contribution will it take to wind up a millionaire by age 65? That depends largely on your investment strategy.
If you play it too safe in your IRA or 401(k) plan by mostly sticking to bonds, you might limit yourself to an average annual 4% or 5% return. That's not terrible for someone who's within a couple of years of retirement. But if you're planning to save for that milestone over the course of several decades, you'll want to snag a higher return than that.
That's where stocks come in. Though stocks are a riskier prospect than bonds, the potential for much higher returns exists. And if you give yourself a decades-long savings window, you'll have time to ride out stock market downturns and still come out ahead financially.
Let's assume that you're willing to go heavy on stocks in your retirement plan, and as such, your investments generate an average annual 8% return, which is a bit below the market's average. Let's also assume that you're able to start contributing to a retirement account at the age of 25, leaving you with a 40-year wealth-building window.
Believe it or not, all it will take is a monthly contribution of $350 for you to retire at age 65 with over $1 million to your name. And if you're able to part with $650 a month, you'll have over $2 million by your 65th birthday.
It's all about commitment and strategy
Some people get to retire with millions because they secure high-paying jobs that allow them to sock lots of money away. But even if you're a pretty average earner, it's more than possible to close out your career with $1 million or more to your name.
To do that, though, you'll need to commit to that goal from an early age and consistently fund a retirement plan for many years. In fact, you should really make a point to allocate money for retirement as soon as there's a steady paycheck coming your way.
You'll also need to employ the right investing strategy. But if you check off these important boxes, you could end up retiring with more money than you ever imagined.
