How to All But Clinch a Millionaire Retirement | Smart Change: Personal Finance

(Chuck Saletta)

Despite the rampant inflation we’re all feeling today, $1 million is still a lot of money. Indeed, it’s nearly four times the median household net worth of people around retirement age. As a result, even today, a million dollar nest egg, when combined with Social Security and Medicare, should be enough for a reasonably comfortable retirement in most parts of the country.

That makes a $1 million nest egg a great goal to shoot for. Of course, since it’s so far ahead of where the median household sits, it’s obviously said easier than done. There are no guarantees when it comes to investing, but there is a straightforward, three step approach that can help you all but clinch that millionaire retirement.

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Step 1: Start early

The sooner you get started building your retirement nest egg, the easier it is to reach that $1 million balance. This is because compounding tends to have a bigger base to work from the longer you let it work its magic. The following chart shows the potential growth of a single $10,000 investment over time, based on the rate of return you earn and the number of years you let it compound.

Years compounding

10% Annual Returns

8% annual returns

6% annual returns

4% annual returns































That early money can really make a difference to your net worth by the time you retire. Just look at that top row that shows how much larger your single investment can grow if you sock it away and leave it alone for pretty much your entire career.

Step 2: Invest consistently

Of course, if you’re well past the point where you’ve got four-plus decades to wait until retirement, the chance to put that super-early money to work may be behind you. The good news on that front is that you might still have a decent shot of clinching that millionaire retirement by investing consistently.

By making regular investments each payday, each investment has the opportunity to compound between the time you make it and the time you need to tap it for retirement. The following chart shows how much you need to invest each month to reach $1 million by retirement, based on the number of years you have to invest and the rate of return you earn.

Years to Go

10% Annual Returns

8% annual returns

6% annual returns

4% annual returns































While there’s still a huge advantage to starting early, the good news here is that mid-career professionals still have a decent shot of clinching that millionaire retirement. Be forewarned, though, that time can quickly start to work against you.

Look at how much you need to sock away each month if you start saving with ten or fewer years left before you retire. If you thought socking away a few hundred a month early in your career was tough, try going from $0 to a few thousand later in your career. So even though investing consistently is key, starting as soon as possible makes it much more likely to reach your goal.

Step 3: Buy stocks for the long haul

Although the first half of 2022 reminded us that stocks can go down as well as up, over the long haul, there’s still good reason to believe stocks can be a great wealth building tool. That 10% returns column in the left hand side of both those tables is there for a reason. That’s about in line with the stock market’s overall historical long-term returns. Stock returns are never guaranteed, but it’s certainly nice to know that these numbers are all in line with what history suggests is in the realm of possible.

No matter what the market’s future holds, one great approach to buying stocks is to buy a low-cost, broad-based index fund. Those types of investments are widely available in brokerages and in many employer-sponsored 401(k) type plans. They offer market-like returns with almost no overhead costs, and best of all, they tend to beat most actively managed mutual funds over time.

That means that one of the easiest ways to buy stocks is also one of the best. Over time, consistently investing in broad-market index funds gives you a great shot to all but clinch that millionaire retirement.

Get started now

When it comes to saving for retirement, no matter what your personal target is, the sooner you get started, the more time you have on your side. So make today the day to put your plan in place, and boost your shot of reaching that million dollar nest egg by the time you retire.

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Chuck Saletta has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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