How to realistically save $1 million for retirement

One million dollars: for most of us, that seems like a lot to save for retirement. Given that the median household income is $53,657 — according to the U.S. Census Bureau — it would take about 19 years to amass $1 million if a person earning that much saved every cent of every paycheck.

Of course, saving that much isn’t realistic. However, it is realistic to have $1 million in a retirement account by the age of 65, if you invest a portion of your paycheck in stocks and let the power of compounding interest do its magic. Aiming for this level of savings is a good starting point, said Karen Kruzel, a fiduciary investment advisor at Unified Trust Company in Lexington, Ky.

“Using the ‘4 percent rule’ — drawing 4 percent annually from retirement savings — this level of savings, coupled with Social Security benefits, will probably meet all spending needs for the long duration of retirement,” Kruzel said. “However, $1 million may not be appropriate for everyone.”

How Much You Should Save for Retirement

If you plan to live an expensive retirement lifestyle that includes frequent travel or a vacation home purchase, you will likely need more than $1 million. Other people might need less, assuming they’re frugal in retirement and remain in good health.

“No two people will have the same exact retirement [needs],” said Chuck Mattiucci, a financial advisor with Fragasso Financial Advisors in Pittsburgh, Pa. “There is no one-size-fits-all approach to retirement planning.”

To determine how much you’ll need, you have to think about what you want your retirement to look like. Typically, financial planners advise people to replace 70 percent to 85 percent of their income in retirement. These funds can come from savings, Social Security and pension income.

You can estimate your retirement income using Fidelity’s free online calculator or the free FuturePath planning tool from T. Rowe Price.

Financial planners typically recommend setting aside 15 percent of your salary annually — including matching contributions from an employer — to save enough for a comfortable retirement. A recent Fidelity Investments analysis of 401k participants who have salaries below $150,000 per year but $1 million or more in their accounts revealed that they save an average of 14 percent of their salaries.

Unfortunately, one in three Americans has nothing saved for retirement, according to a recent GOBankingRates survey. But you can still reach the $1 million mark, if you start now and follow these tips.

How to Save $1 Million

We calculated how much you would need to invest each month, starting at various ages, to save $1 million by 65. We also used several annual rates of return. On average, the stock market has returned 10 percent annually over the long term, but this rate is closer to 6 percent when you adjust for inflation.

Investing in stocks — or mutual funds that hold a variety of stocks — is the key to getting the returns you need to reach your goals. Fidelity Investments found that those with more than $1 million in their 401k accounts had more than 70 percent of their assets invested in equities.

How to Save $1 Million Starting at Age 25

Assuming a 10 percent return, you will need to save about $158 per month to have $1 million by age 65 if you start investing at 25. With a more conservative 6 percent annual return, you will need to stash $502 in savings each month.

The younger you are when you start saving, the less you will have to set aside each month to amass $1 million by retirement. For this reason, it’s important to get into the habit of paying yourself first, starting with your first paycheck, said Kevin Smith, executive vice president of wealth management at Smith, Mayer & Liddle in York, Pa.

It’s a good idea to have contributions to a workplace retirement account deducted from your paycheck automatically. According to Smith, you won’t have a chance to spend the money, and you’ll get used to living on what is left after you pay yourself first.

If there’s not enough room in your budget to set aside 15 percent, save enough to get the full matching contribution from your employer, assuming your company offers a match for retirement contributions. Otherwise, you’re leaving free money on the table.

How to Save $1 Million Starting at Age 35

If you wait until age 35 to start saving, you’ll need to set aside nearly twice as much each month as if you’d started a decade earlier. Assuming a 10 percent annual return, you will need to save about $442 a month to have $1 million by age 65. With a 6 percent return, you will have to save $995 per month.

As you move up the career ladder and start earning more, you should increase your retirement contributions with each raise or bonus to make up for lost time.

“By slowly increasing your monthly contributions, even by a few dollars each month, this will then ease the stress of having less take-home pay,” said Leslie Tayne, a debt attorney in Long Island, N.Y., and author of “Life & Debt.”

It’s important that individuals in this age bracket resist the urge to increase their spending as their income rises.

“One of the best tips to becoming a millionaire is to live within your means and stop living like a millionaire,” Smith said. “Those more likely to be millionaires frequently are common, everyday Americans ranging from plumbers, construction workers and schoolteachers to laborers, salespeople and middle managers who developed sound financial habits early and put investment monies aside on a regular basis, while keeping expenditures in check.”

How to Save $1 Million Starting at Age 45

You will have to save about $1,317 a month and earn 10 percent annually on your investments to have $1 million by age 65, if you wait until age 45 to start saving. With a 6 percent return, you will need to save $2,164 a month.

Setting aside that much each month can be especially challenging for parents who have kids in college. Nearly half of Americans place a greater importance on helping their children pay for school than saving for their retirement, according to a recent poll from RBC Wealth Management-U.S. Unfortunately, retired individuals don’t have access to loans the way college students do.

Parents whose kids are currently away at school might want to consider downsizing to a smaller home in their 40s to lower their housing costs and have more money to set aside for retirement.

How to Save $1 Million Starting at Age 50

If you wait until age 50 to start saving, you will need to stash about $2,413 a month with 10 percent annual returns, or $3,439 a month with 6 percent annual returns, to have $1 million by age 65. Taking advantage of catch-up contributions can help you reach this goal.

In 2016, you can add an extra $6,000 to a 401k, 403(b) or 457 plan for a maximum contribution of $24,000. Additionally, you can boost traditional and Roth IRA contributions by $1,000, bringing the total amount you can set aside in these accounts to $6,500.

People in their 50s shouldn’t shy away from equities, either. Fidelity Freedom Funds, which are target date funds that automatically adjust asset allocation based on a retirement date, still include equity investments for those in their 50s. Being too conservative can hurt your chances of getting the return you need to reach $1 million by age 65.

It’s clear that reaching your retirement saving goals is easier when you begin setting aside funds in your youth.

“Time is your friend,” Kruzel said. “Start now and make saving a priority.”

If you need help creating a plan to reach your saving goal, start by asking if your employer offers access to investment advice as part of your benefits package. Otherwise, consider meeting with a financial planner. You can find planners that charge by the hour, such as those in the Garrett Planning Network, or search online at GuideVine.com or NAPFA.org, the website for the National Association of Personal Financial Advisors.

From GoBankingRates.com: What it takes to save $1 million for retirement

ad-high_impact_4
Business
With holidays around the corner, department stores hiring extra staff
J.C. Penny hired 72 seasonal workers this year at the Galleria at Sunset mall in Henderson in order to handle the heavy traffic of the holiday shopping season. (Rachel Aston/Las Vegas Review-Journal)
Startup Weekend fosters new businesses
With the help of entrepreneurial peers and an expert panel of mentors, Techstars Startup Weekend fosters the ideas of attendees into marketable business plans. (Rachel Aston/Las Vegas Review-Journal)
Mecum Car Auction in Las Vegas
The Mecum Auctions is held at the Las Vegas Convention Center. Bizuayehu Tesfaye/ Las Vegas Review-Journal @bizutesfaye
Construction underway for new Google Data Center
Henderson is slated to be home to a new Google data center in December 2020. The Governor’s Office of Economic Development approved $25.2 million in tax abatements for Design LLC, a wholly-owned subsidiary of Google. The company plans to build the data center on 64 acres of land on Warm Springs Road west of Boulder Highway.
Anthony Rufo talks about his new product, an in-home digital companion and monitor.
Anthony Rufo talks about his new product, HAPPIE Home technology, an in-home digital companion and monitor designed for unpaid family caregivers that gives personalized alerts, messages and reminders. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Holiday parades help bring shoppers to Downtown Summerlin
Sports Town USA floor manager Angela Gardonio talks about the work that goes into the Downtown Summerlin holiday parades and how they benefit her and other businesses there.
Final vote on CG Technology
Final commission vote on the $2 million settlement for CG Technology.
Happie Home Startup Establishing Headquarters In Las Vegas
Digital companion startup company Happie Home is establishing its headquarters in Las Vegas after receiving tax abatements from the Governor's Office of Economic Development on Nov. 15. (Bailey Schulz/Las Vegas Review-Journal)
A Facebook-branded space inside of Macy’s at the Fashion Show shopping center
A Facebook-branded space inside of Macy’s at the Fashion Show shopping center will showcase 13 small businesses in November and December and seven in January. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
T-Mobile uses ticketing data to plan for event
T-Mobile Executive Director of Arena Operations explains how ticket sales data and demographics help plan staffing, vendors, parking and operations for an event.
Costco opens its doors in southwest Henderson
Costco has opened its fifth Las Vegas-area location near the intersection of St. Rose Parkway and Amigo Street. (K.M. Cannon/Las Vegas Review-Journal)
Las Vegas strip mall and office park
The Krausz Cos. and WG Group bought a strip mall and an office park in Las Vegas for nearly $80 million total. They acquired a portion of Tropicana Beltway Center in the southwest valley for $59 million. They also acquired the Westbay office complex in the Las Vegas Medical District. The buyers are former owners of The Gramercy, a once-mothballed mixed-use project in the Las Vegas suburbs. They sold The Gramercy in phases for more than $100 million.
Mario Barth talks about the growth of the tattoo industry
Celebrity tattoo artist and business owner Mario Barth talks about the growth of the tattoo industry at The World of Tattoo industry trade show at Planet Hollywood in Las Vegas
$7.5M Las Vegas pot dispensary opens near Las Vegas Strip
Planet 13, which bills itself as one of the largest dispensaries in the world, opened to the public Thursday. It has entertainment including an interactive floor and floating orbs. (K.M. Cannon/Las Vegas Review-Journal)
Caesars CEO to step down next year
Caesars Entertainment Corp. CEO Mark Frissora will leave the casino company in February. Frissora has been CEO since July 2015. He was named CEO right after Caesars' operating company filed for Chapter 11 bankruptcy protection Caesars Entertainment emerged from bankruptcy protection in October 2017 Before Caesars, Frissora spent seven years as chairman and CEO of Naples, Fla.,-based Hertz He led the consolidation of the rental-car industry through Hertz‘s acquisition of the Dollar Thrifty Automotive Group.
Planet 13 in Las Vegas adds twist to marijuana dispensary look
Planet 13, which bills itself as one of the largest dispensaries in the world, opened to the public Thursday. The dispensary is located near the intersection of Desert Inn Road and Sammy Davis Jr. Drive, near Trump International, in Las Vegas. Planet 13 has plans in the future for a coffee shop, a tasting room for marijuana-infused beer and wine, a lounge for consuming marijuana on site if that is legalized and space for food.
Caesars Entertainment opening 2 resorts in Dubai
Cove Beach will open on Meraas’ Bluewaters Island in Dubai in November and Caesars Palace Bluewaters Dubai and The Residences at Caesars Palace Bluewaters Dubai will open in December. (Caesars Entertainment)
Bellagio, MGM Resorts International’s luxury hotel turns 20
The more than 3,000-room Bellagio hotel is situated on the site of the former Dunes Hotel. The Dunes was imploded in 1993, and construction of the Bellagio started in 1996. It cost $1.6 billion to build, making it the most expensive hotel in the world at the time. The Bellagio was former Wynn Resorts Ltd. Chairman and CEO Steve Wynn’s second major casino on the Strip after The Mirage. MGM Resorts International acquired the property from Steve Wynn in 2000. (Tara Mack/Las Vegas Review-Journal)
Facial recognition software at G2E – Todd Prince
Shing Tao, CEO of Las Vegas-based Remark Holdings, talks about his facial recognition product. (Todd Prince/Las Vegas Review-Journal)
Former NBA player, Shaquille O'Neal, speaks about his new Las Vegas chicken restaurant
Former NBA player, Shaquille O'Neal, speaks about his new Las Vegas chicken restaurant. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Bobby Baldwin to leave MGM
MGM Resorts International executive and professional poker player Bobby Baldwin is set to leave MGM.
Caesars has new armed emergency response teams
Caesars Entertainment Corp. has created armed emergency response teams. They are composed of former military and law enforcement officials. "These teams provide valuable additional security capabilities,” Caesars spokeswoman Jennifer Forkish said. Caesars is hiring Security Saturation Team supervisors, managers and officers, according to LinkedIn. The company did not say how many people it plans to hire for the units. (Las Vegas Review-Journal)
Las Vegas, airlines prepare for CES
CES in January is expected to attract more than 180,000 attendees. (Las Vegas Review-Journal)
AGS partners with Vegas Golden Knights
AGS is the nation’s second-largest manufacturer of Class II slot machines used primarily in tribal jurisdictions. It announced a marketing partnership with the Vegas Golden Knights NHL team. (Las Vegas Review-Journal)
Lehman Brothers bet big on Las Vegas
Lehman Brothers collapsed 10 years ago, helping send the country into the Great Recession.
Fremont9 opens downtown
Fremont9 apartment complex has opened in downtown Las Vegas. (Marcus Villagran/Las Vegas Review-Journal) @marcusvillagran
Ross & Snow launches in Las Vegas
Luxury shoe brand Ross & Snow has opened in Las Vegas, featuring "functional luxury" with premium shearling footwear. (Bailey Schulz/Las Vegas Review-Journal)
Remote Identification and Drones
DJI vice president of policy and public affairs discusses using remote identification on drones. (Bailey Schulz/Las Vegas Review-Journal)
Drones and public safety in Nevada
Two representatives in the drone industry discuss UAV's impact on public safety. (Bailey Schulz/Las Vegas Review-Journal)
Frontier Airlines to launch flights from Las Vegas to Mexico
Frontier, a Denver-based ultra-low-cost carrier, will become the first airline in more than a decade to offer international service to Canada and Mexico from Las Vegas when flights to Cancun and Los Cabos begin Dec. 15. (Rick Velotta/Las Vegas Review-Journal)
TOP NEWS
News Headlines
Add Event
Home Front Page Footer Listing
Circular
You May Like

You May Like