How Much Do You Need to Save per Month to Retire With $1 Million?

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Many people have financial targets they want to reach by retirement, and $1 million is a common choice. It’s a nice, round number that experts have recommended for years. Even though the average retiree doesn’t have nearly this much, it’s doable to save that much, and you don’t need a six-figure salary to get there.

Here’s how much you need to save per month to retire with $1 million

There are really only two steps to follow to retire with $1 million. First, you need to put money into your retirement accounts every month. You also need to invest that money so it will grow more. The stock market has returned an average of 10% per year over the last 50 years, so this can help you build wealth much faster.

How much will you need to save per month? That primarily depends on your age, because if you’re younger, your money has more time to grow. Let’s say you want to retire at 65, and you earn 10% per year investing your money. Here’s what you’d need to save per month depending on your age:

  • If you start at 20 years old, you need to save $116 per month.
  • If you start at 30 years old, you need to save $307 per month.
  • If you start at 40 years old, you need to save $847 per month.
  • If you start at 50 years old, you need to save $2,623 per month.

As you can see, if you start young, it doesn’t take a huge amount of money per month to save $1 million for retirement. Even 30-year-olds could do it with a little over $300 per month. It’s when you wait until your 40s and 50s that it gets much more challenging.

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How to save for retirement

The general idea behind saving for retirement is simple enough: put money in retirement accounts every month and invest it. However, there are some things you can do to speed up your progress toward that $1 million.

If you have an employer, check to see if your company offers a retirement plan. Many companies have retirement plans, such as 401(k)s, and will match your contributions up to a certain amount. For example, your employer may match 50% of your 401(k) contributions on up to 6% of your salary. This is a great way to increase your retirement savings without spending more.

In addition, 401(k) contributions are tax-deferred. You don’t pay taxes on that income, and instead, you only pay taxes on withdrawals.

Another way to save on taxes is with an individual retirement account (IRA). Unlike a 401(k), this is a retirement account you open on your own. You could get one if you’re self-employed, a small business owner, or if you already have a 401(k) and you want an additional retirement account. There are two types of IRAs:

  • Traditional IRAs: Contributions are tax-deductible, and you pay taxes on withdrawals.
  • Roth IRAs: Contributions are taxed as normal income, but withdrawals are tax free.

Your other option is to invest in an individual brokerage account. This doesn’t have the tax benefits that 401(k)s and IRAs offer. The advantage of an individual brokerage account with a stock broker is you can withdraw money at any time without penalty. With a 401(k) or an IRA, there’s an early withdrawal penalty for withdrawals before the age of 59 1/2.

Is $1 million enough to retire?

A nest egg of $1 million might seem like more than enough for a comfortable retirement. It can be, but this depends on how much you expect to spend.

One way to estimate how much you need for retirement is the 4% rule. According to this rule, retirees can safely withdraw 4% of their retirement savings per year for 30 years without running out of money. If you have $1 million, that means you could withdraw $40,000 per year.

Keep in mind that you could need more money than you think for retirement. Healthcare, in particular, is often a big expense for retirees. And if retirement is still a long way away, it’s also important to consider inflation. A yearly income of $40,000 will buy far less in 30 years than it buys now. According to a recent analysis by Wealthcare Financial, Generation Z and millennials will need $3 million in retirement savings because of inflation.

Everyone’s financial needs are different, so there’s no one-size-fits-all financial target. You could be set with $1 million, especially if you don’t expect to spend a large amount in retirement. But it’s also recommended that you save as much as you can, because having more in your retirement accounts can’t hurt.


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