Planning for retirement is tough, especially as costs surge. The average worker expects to need around $1.8 million to retire comfortably, according to a 2023 survey from Charles Schwab. For many people, then, saving $1 million is not only a reasonable goal, but a necessity.
While it's not easy to retire a millionaire, it is achievable -- with the right strategy. You don't need to be wealthy or a stock market expert to save a lot for retirement. With the following three steps, you'll be on your way to a million-dollar nest egg.
Image source: Getty Images.
1. Start saving now
Time is your most valuable resource when saving for retirement. Thanks to compound growth, your savings will grow exponentially the longer they have to accumulate. The sooner you get started, the less you'll need to save each month to reach your goal.
For example, say you want to save $1 million by retirement age and your portfolio is earning a modest 8% average annual rate of return. Here's roughly how much you'd need to invest each month, depending on how many years you have to save:
| Number of Years | Amount Saved per Month | Total Savings |
|---|---|---|
| 40 | $350 | $1.088 million |
| 35 | $500 | $1.034 million |
| 30 | $750 | $1.020 million |
| 25 | $1,200 | $1.053 million |
| 20 | $1,900 | $1.043 million |
Data source: Author's calculations via investor.gov.
Of course, you can't go back in time and begin saving earlier if you're off to a late start. But if you're trying to decide whether to invest now or put it off until you have more to save each month, it's usually better to start now. You can always increase your savings later, but you can't get this time back.
2. Take advantage of all available perks
Perks like employer matching 401(k) contributions or automatic transfers can help you save more with less effort. An employer match is essentially free money and can instantly double your savings, with no extra work on your part.
Not all companies offer this perk, but if yours does, it's wise to take full advantage of it. If you're earning, say, $50,000 per year and your employer will match 3% of your salary, that's $1,500 per year in free contributions you could be receiving.
If you have access to automatic transfers through your 401(k), you may be able to transfer a set amount of cash straight from your paycheck to your retirement fund. If you're investing through an IRA, you may be able to transfer money from your bank to your retirement account on the schedule you choose.
Automatic transfers can help build saving into your budget and keep you on schedule. Rather than simply saving whatever scraps you have left at the end of the month, it's easier to make investing in your retirement a priority.
3. Keep a long-term outlook
It takes decades to build a million-dollar retirement fund, so try not to get discouraged if progress is slow at first. Again, compound growth helps your money grow faster over time. While the first decade or so may feel sluggish, the longer you let your savings grow, the faster they'll build.
For example, say you're investing $200 per month while earning an 8% average annual rate of return. Here's a look at how your savings would grow over time, assuming you're investing consistently for decades.
Image source: The Motley Fool.
It takes time to start seeing substantial growth, so patience is key. But if you're able to maintain a long-term outlook, you'll reap the rewards over time.
Reaching $1 million in retirement savings isn't easy, but the right approach can make it an achievable goal. When you start investing early, take advantage of any perks you have, and keep a long-term outlook, you'll be on your way to a millionaire retirement.
