Retiring with $1 million or more may seem like a lofty goal. But as retirement becomes more expensive, it's a realistic target for many older adults. In fact, the average worker expects to need around $1.7 million to retire comfortably, according to a 2022 survey from Charles Schwab.
While it's not always easy to retire a millionaire, it is attainable -- even if you're not wealthy or a stock market expert. With the right strategy, it may even be simpler than you think. Here's exactly how to get there.
Image source: Getty Images.
1. Start investing now
Time is your most valuable resource when saving for retirement, and every single year counts. Thanks to compound earnings, your money will grow exponentially the longer it has to accumulate.
The sooner you start saving, the less you'll need to save each month to reach your goal. Even if you can't afford to invest much now, you're better off saving whatever you can, rather than putting it off.
2. Ensure you're investing aggressively enough
Most people's retirement portfolios consist of a mix of stocks and bonds. Investing in bonds and other conservative investments may seem safer than investing primarily in stocks, but that approach is riskier than it may seem.
Bonds generally don't experience as much volatility as stocks but also tend to earn much lower returns. Even slightly lower average returns can reduce your total savings by hundreds of thousands of dollars over time.
For example, say you're investing $300 per month and have 35 years left to save. With a 5% average annual return, you'd accumulate around $325,000 in that time. With an 8% average annual return, though, you'd earn roughly $620,000.
This isn't to say you shouldn't invest in bonds at all. As you get closer to retirement, your portfolio should gradually shift toward the conservative side to better protect your savings against market volatility. But when you still have decades left to save, investing more aggressively can help you earn far more over time.
3. Keep a long-term outlook
It takes decades to see substantial earnings in the stock market, and in the short term, you'll have good years and bad years. In particularly volatile years, you may not see positive returns on your investments at all.
Over the long haul, though, the stock market is exceptional at surviving downturns and earning positive average returns. While the stock market still has its ups and downs, historically, the good years have far outnumbered the bad ones.
Putting it all together
By getting started saving early, investing aggressively enough, and keeping a long-term outlook, it's easier than you may think to reach $1 million by retirement age.
Historically, the market, as a whole, has earned an average annual return of around 10% per year. In other words, all the annual highs and lows have averaged out to roughly 10% per year over several decades.
If you're earning a 10% average annual return on your investments, here's approximately how much you'd need to invest each month to accumulate $1 million, depending on how many years you have to save:
| Number of Years | Amount Invested per Month | Total Savings |
|---|---|---|
| 20 | $1,500 | $1.031 million |
| 25 | $900 | $1.062 million |
| 30 | $525 | $1.036 million |
| 35 | $325 | $1.057 million |
| 40 | $200 | $1.062 million |
Data source: Author's calculations via Investor.gov.
With enough time and consistency, just a couple of hundred dollars per month can put you on the path toward millionaire status. If you're able to set your savings on autopilot and invest consistently month after month, it will be easier to reach $1 million while barely lifting a finger.
Retiring a millionaire requires time and consistency and is an attainable goal for many people. By getting started now and keeping a long-term outlook, you'll be well on your way to saving $1 million or more.
