How Much Do You Need to Save in Twenty Years to Become a Retired Millionaire?
Because of compound interest over time, the dollar you saved in your early twenties will be worth $ 10 when you retire. Consequently, with consistent savings in early adulthood, it is more than possible to become a millionaire after retirement, even if you receive an average salary. Let’s see how to achieve this.
The sooner you start saving, the better.
The best way to multiply your money is to use the phenomenon of compound interest , a process in which the amount of money grows exponentially based on the interest earned on the money saved, plus any accrued interest you’ve already earned. The longer you can participate in this process, the more exaggerated the effect, which is why every dollar you save after twenty is so valuable.
Of course, there are some obstacles to saving money at the age of twenty that shouldn’t be taken lightly. You can spend a significant portion of a decade in school instead of working, and you probably won’t have a lot of work experience when you graduate, reducing your ability to earn. Regardless, it is still possible to start funding your million dollar retirement pension after graduation, as long as your student debt is manageable and you can find extra money to save each month.
How to save a million dollars from 22 years old
If you were to start saving from scratch at 22 years old, and we assume an average annual return of 7% with inflation constant at 3%, you would need to save $ 282 per month to make $ 1 million by the time you turn. 67 years old. … (You can play with math using this retirement calculator ).
Assuming you make $ 33,280 a year – the average full-time wage for people between the ages of 18 and 24 – you are saving 10% of your paycheck to achieve this goal, which is what most do. financial planners. usually recommend. Sure, this is no easy feat in the early years of your career and will likely require sacrifice to cut your expenses (like living at home for a while), but it’s definitely an achievable goal. The good news is that the average wage in the United States rises to $ 47,736 between the ages of 25 and 34 – a sharp 30% increase. If so, you could stick with the course or increase your contributions to reach your million dollar goal even earlier.