How to Save $1 Million in 20 Years (2024)

How to Save $1 Million in 20 Years (1)

When it comes to retirement, perhaps the single biggest question is “how much do you need to save?” And the honest answer depends entirely on how you want to live, what responsibilities you have and where you want to be. Many financial advisors recommend $1 million as a good rule of thumb. And with this amount in principal, you can draw down a comfortable annual income. For workers ages 45 to 50, it’s not too late to build up a meaningful nest egg. Here are some tips for hitting that $1 million mark in 20 years with a lot of hard work.

A financial advisor can help you create a financial plan for your retirement needs and goals.

Retire Later If Possible

Most experts no longer consider 65 the age of retirement. Based on Social Security, the federal government now treats 67 as the full age of retirement. Many other experts, from financial advisors to academics, go further and suggest that most Americans should consider 70 the new age for retirement.

This is doubly true for young people. Between multiple recessions, wage stagnation and student debt, workers born after 1980 have little to show in retirement savings. Many will have to work longer to make up for that lost time.

In all of this is at least one good perspective. Retiring later gives you more time to earn and save money. In particular, it’s a much better strategy than planning to return to work if necessary. You’re better off working until 70 than trying to return to work at 80.

Target a Rate of Return

Whenever you have a financial goal, the first question is to choose a rate of return you want to target. The idea here isn’t that you can select your rate of return, obviously not. Rather this is about risk and reward planning.

With a more aggressive portfolio that targets a higher rate of return, you can contribute less on a regular basis. But you also need the flexibility to make up for losses at need. This is a good strategy if you want to dedicate less of your take home income to this retirement account, but can also make large catch-up contributions at need.

If you build a less aggressive portfolio that targets a lower rate of return, you will need to contribute more to the portfolio on a regular basis to reach your goals. But you don’t need to plan for as much risk, so you don’t need as much financial flexibility to make up for losses.

A good rule of thumb is to target 10%. Historically, this has been the average rate of return of the S&P 500. That doesn’t make 10% a guarantee; there are no guarantees in investing. This is just a middle ground between conservative investments, like bonds, and speculative investments, like individual stocks.

Adjust Your Investments for Inflation

Twenty years is a long time. Even during ordinary periods, that’s long enough for inflation to eat away at the value of any fixed-rate contributions. Be sure to account for that in your plans.

However you build your retirement plans, make sure to periodically adjust those contributions for the value of money. If you contribute $100 per month to this account, for example, try to adjust it to $105 in the next year. Ideally, actually adjust your investments based on current inflation numbers. Even small adjustments can keep you from steadily losing money to inflation over time.

Calculate Daily, Monthly and Annual Investments

Now we get to the core of the issue. If you have 20 years and want to reach $1 million in savings, how much do you need to set aside?

If we assume a 10% rate of return (again, not a guarantee but an estimate based on the historic average rate of return from the S&P 500), then the truth is that this will take a lot of money. The best way to figure out exactly how much you need to contribute, and on what basis, is by using an investment calculator.

In general, you will need to contribute around $1,400 per month to this account in order to reach $1 million in 20 years. For some investors, it may be easier to break this into daily contributions. In that case, you want to put about $50 per day into this account. Other investors may want to consider this in terms of annual income, which comes to $16,800 per year.

If you do plan this budget annually, make sure to invest the money in January rather than December. Market timing aside, you’re better off investing early so you can capture the gains of the coming 12 months.

Adjust Your Savings and Time Horizon

Now, the good news for people with a 401(k) plan is that this may be less difficult than it seems. If you have a job with matching contributions, your employer will likely cover several hundred dollars of those monthly savings.

Beyond that, the hard truth is that setting aside $1,400 per month is an enormous lift for most people. If possible, the best way to make this work is to find a way to save longer than 20 years. If you’re younger, can you start saving now? If you’re older, can you work a little bit longer?

Both might seem like difficult answers, but even adding a few years to your savings can make a massive difference. For example, it takes $1,400 per month to reach $1 million in 20 years. However if you can find 30 years to save, it only takes $475 per month to reach the same goal. This isn’t easy, but finding the extra time may be easier than finding an extra $12,000 per year.

Bottom Line

How to Save $1 Million in 20 Years (3)

Given an average 10% rate of return on the S&P 500, you need to save about $1,400 per month in order to save up $1 million over 20 years. That’s a lot of money, but the good news is that changing the variables even a little bit can make a big difference.

Tips to Invest in Retirement

  • A financial advisor can help you pick retirement investments for your financial plan. SmartAsset’s free toolmatches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals,get started now.

  • SmartAsset’s free retirement calculator can help you figure out how much money you will need to pay for retirement.

Photo credit:©iStock/whyframestudio,©iStock/South_agency,©iStock/courtneyk

The post How to Save a Million Dollars in 20 Years appeared first on SmartAsset Blog.

How to Save $1 Million in 20 Years (2024)


How to Save $1 Million in 20 Years? ›

To save $1 million in 20 years, you would need to save approximately $1,900 per month, assuming an average annual investment return of 7%. This calculation considers the power of compound interest and is subject to variations based on actual returns and investment choices.

How much do I need to save to have a million dollars in 20 years? ›

The longer you wait to start saving, the more cash you'll have to put aside each month to reach your goal. If you wait until retirement is 20 years away, you will need to save $1,382 per month to hit the million-dollar mark, assuming a 10% return. At 6% you will need to save $2,195 per month!

Will $1 million be enough to retire in 20 years? ›

How long will $1 million in retirement savings last? In more than 20 U.S. states, a million-dollar nest egg can cover retirees' living expenses for at least 20 years, a new analysis shows. It's worth noting that most Americans are nowhere near having that much money socked away.

How long does it take to save $1 million? ›

If you invest $1,000 per month, you'll have $1 million in 25.5 years.
Monthly contributionTime to reach $1 million with an 8% annual return
$50033.3 years
$1,00025.5 years
$2,50016.3 years
$5,00010.6 years
1 more row
Nov 20, 2023

How many people have $1000000 in savings? ›

In fact, statistically, around 10% of retirees have $1 million or more in savings.

At what age can you retire with $1 million dollars? ›

Retiring at 65 with $1 million is entirely possible. Suppose you need your retirement savings to last for 15 years. Using this figure, your $1 million would provide you with just over $66,000 annually. Should you need it to last a bit longer, say 25 years, you will have $40,000 a year to play with.

Is saving $1,800 a month good? ›

You are in great shape if you can contribute $1800/month at your age of 24. If you start now and keep doing it for 26 years, you will have close to $2 Million at the age of 50. (assuming an average of 8% growth per year).

Can you live off interest of $1 million dollars? ›

Historically, the stock market has an average annual rate of return between 10–12%. So if your $1 million is invested in good growth stock mutual funds, that means you could potentially live off of $100,000 to $120,000 each year without ever touching your one-million-dollar goose. But let's be even more conservative.

How much monthly income will $1 million generate? ›

At the current Treasury rate of 4.3%, a $1 million portfolio would generate about $43,000 per year, or roughly $3,500 per month. With your Social Security payments that would generate about $6,000, again enough to live comfortably in most places.

How much money do most people retire with? ›

What is the average and median retirement savings? The average retirement savings for all families is $333,940 according to the 2022 Survey of Consumer Finances.

How long would $100 million last you? ›

So $100 million is - at minimum - 50 times what you'd need to live an average life for you and your family. So, you'd think as long as you keep your spending below 50 times what people, on average, spend - about $2.5 million a year - it would last you your whole life.

How long will it take to turn 500k into $1 million? ›

How long will it take to turn 500k into $1 million? The time it takes to invest half turn 500k into $1 million depends on the investment return and the amount of time invested. If invested with an average annual return of 7%, it would take around 15 years to turn 500k into $1 million.

How to save $1,000,000 in 15 years? ›

$1 Million the Easy Way

Putting aside someone's $40,000 in take-home pay every year—and earning that 10% return as described above—will get you to millionaire status in about 15 years. Halve those savings and you're still only looking at 20 years. It will take more work for sure, but it's a lot faster than 51.

What is considered rich in savings? ›

Someone who has $1 million in liquid assets, for instance, is usually considered to be a high net worth (HNW) individual. You might need $5 million to $10 million to qualify as having a very high net worth while it may take $30 million or more to be considered ultra-high net worth.

What net worth is considered rich? ›

While having a net worth of about $2.2 million is seen as the benchmark for being rich in America, it's essential to remember that wealth is a subjective concept. Healthy financial habits and personal perspectives on money are crucial in defining and achieving wealth.

How long will $1 million in 401k last? ›

Is a million dollars enough money to ensure a financially secure future? A recent analysis determined that a $1 million retirement nest egg may only last about 20 years depending on what state you live in.

How much do I need to save to have $1 million in 15 years? ›

Putting aside someone's $40,000 in take-home pay every year—and earning that 10% return as described above—will get you to millionaire status in about 15 years. Halve those savings and you're still only looking at 20 years. It will take more work for sure, but it's a lot faster than 51.

How much do I need to save to have $1 million in 10 years? ›

In order to hit your goal of $1 million in 10 years, SmartAsset's savings calculator estimates that you would need to save around $7,900 per month. This is if you're just putting your money into a high-yield savings account with an average annual percentage yield (APY) of 1.10%.

How much to invest to make $1 million in 15 years? ›

But in order to be a millionaire via investing in 15 years, you'd only have to invest $43,000 per year (assuming a 6% real rate of return, which accounts for inflation). I know, I know – only $43,000 per year. No big deal. *From this point forward, the average real rate of return we'll be assuming is 6%.

How much do I need to save to have 1 million dollars in 30 years? ›

To save a million dollars in 30 years, you'll need to deposit around $850 a month. If you make $50k a year, that's roughly 20% of your pre-tax income. If you can't afford that now then you may want to dissect your expenses to see where you can cut, but if that doesn't work then saving something is better than nothing.

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