How Long Does it Take to Earn a Million Dollars?
A million dollars. For many people, it’s the pinnacle of financial success. For others, it’s just the first stepping stone toward their outrageous dreams. But how long does it take to actually reach that goal? How much would you need to save on a monthly basis to net a cool million dollars? And, most importantly, is achieving millionaire status even within the realm of possibility for most Americans?
If you’ve ever seriously considered these questions with the intention of implementing the answers in your own life, or you’re simply curious, then we’ve got the inside scoop. We’ve crunched the numbers and worked out the math to help you find out exactly how long it takes to become a millionaire.
Who wants to earn a million dollars?
Believe it or not, a million dollars is approximately four times the median net worth of retirement-aged people in the U.S. Even more incredible, a net worth of a million dollars is well within the reach of most Americans. You don’t need a six-digit salary to make it to the millionaires’ list; all you need is enough time and a sound investment strategy.
How long does it take?
There is no pat answer to this question. The amount of time it will take you to have a million dollars depends on the following factors:
1. The amount of money you invest
2. The rate of return on your investment
The table provided here gives you an idea of how much you’d need to save, and how many years it would take you to reach a million dollars, at various rates of return.
|
Monthly Savings
|
Years to $1 million with 10% annual returns
|
8% annual returns
|
6% annual returns
|
4% annual returns
|
|
$100
|
44.5
|
52.9
|
65.7
|
88.6
|
|
$500
|
28.8
|
33.4
|
40.1
|
51
|
|
$1,000
|
22.4
|
25.5
|
29.9
|
36.7
|
|
$1,583
|
18.4
|
20.7
|
23.8
|
28.4
|
|
$2,083
|
16.2
|
18
|
20.4
|
23.9
|
|
$3,166
|
13
|
14.2
|
15.8
|
18
|
|
$4,166
|
11
|
12
|
13.2
|
16.8
|
Note: Maximum contributions, as of 2022, are set at $20,500 a year for 401(k)s and $6,000 a year for traditional IRAs.
Getting started
Now that you’ve determined how long it will take you to reach your first million, don’t waste any time getting started. If you’ve made this your goal, then the sooner you begin investing, the less money you’ll have to put away each month, and the sooner you’ll reach $1 million.
The easiest and most basic starting point for your million-dollar prize is to maximize your contributions to your employer’s 401(k) and your own IRAs and HSAs. Next, look into investing with a low-cost index fund, mutual fund, or lifecycle fund.
If you can’t spare the money you’d need for investing enough funds to achieve your goal, then take some time to review your budget and to plug up any expensive holes. Look for pricey habits you’d be better off giving up, subscriptions you can do without, and entertainment costs you can trim without feeling the pinch. It might not be easy to make all those changes, but with a million-dollar finish line in sight, you should have all the motivation you need to start living a financially responsible life today.
Two neglected factors
One crucial factor most people forget about when trying to invest their way toward a million dollars is the rule of inflation. Simply put, a million dollars today does not have the same value as a million dollars 30 years from now. When you adjust for inflation at three percent a year, $1 million in 2020 would need to grow to $2,427,262 to have the same purchasing power in 2050. For this reason, you may want to tweak the amount you invest as a way of accounting for inflation. This way, you can be sure you have a true $1 million at the end of your investment timeline.
Another point that is often overlooked is the fact that no one can accurately predict the future. There’s no way to know what life events you’ll experience over the next three decades. Some of those can significantly affect your finances in either direction, such as windfalls, expensive medical emergencies, market crashes, and the like. It may end up taking you a lot less time than you’d anticipated reaching $1 million, or you may never get there at all.
Are you ready to start investing your way toward one million dollars? Speak to a representative at United Texas Credit Union today to discuss our investment and savings products, as well as get some beginner investment advice. You can be a millionaire!
Your Turn: Do you dream of being a millionaire or did that goal never make it onto your bucket list? Share your thoughts with us in the comments.
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Sources:
https://www.ramseysolutions.com/retirement/how-to-become-a-millionaire
https://www.cnbc.com/amp/2017/05/19/how-long-it-will-take-you-to-become-a-millionaire.html