The February issue of Kiplinger’s has advice for how to save a million dollars at any age from 25-55. The longer you’ve got the easier it sounds, of course…. and the more inflation will take a toll on your million. Even so, interesting stuff.
How To Save A Million at 25:
To reach one million by age 65 you need to save $286 per month.
How To Save A Million at 35:
To reach one million by age 65 you need to save $671 per month.
How To Save A Million at 45:
To reach one million by age 65 you need to save $1,698 per month.
How To Save A Million at 55:
To reach one million by age 65 you need to save $5,466 per month
(Photo:Tracy O)
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nope, just had 2 parents who were accountants, so I’ve had saving and preparing for retirement drilled into me from the day I was born. Got worse when my parents realized even with all their planning they would have to work a few extra years because of their parent not having planned, and not being able to care for themselves. Proof that stuff happens, no matter how well you plan, but at least they were way ahead of most people their age, or they would be in bankruptcy court right now. That’s why I’m shooting for more than all the estimates say, that way a sick parent, or child, or even myself getting sick doesn’t mean financial ruin for me.
@Saboth: My parents are retired, in their mid-60′s, and easily spend that $16k a year on the travelling that they were never able to do when Dad worked. Plus, there’s all that spending on the grandkids that can really add up.
@nequam: good point, although i dont see how padding the savings account would guard against alien invasion
(i guess i’ve been spending too much time on io9.com, Brought to you by Gawker Media, the wonderful creators of Lifehacker.com, Gizmondo.com and Kotaku.com!!! Meg, can i have some money now? i need to pay for daycare…)
This obsession with saving a million for retirement is another way we are being primed for the day when there will be no pensions (too costly for corporate America) and no social security (too costly for U.S. government). The numbers given above are accurate, using the power of 72, which assumes one can double one’s money in 9 years with an average 8% return. The problem is that for many people it’s totally unrealistic and totally impossible. Consider a general office clerk making $24,000, a stock clerk making $21,000 or a cashier making $18,000. How are they going to put away anything at all for retirement? They need every last dime on which to live. If you can save the recommended amount, more power to you, if not….I guess you work until you die.
Yeah, cuz I’ve got $286 lying around every month. I have it cashed out in one’s and I roll around it on my bed.
Yeah all this would work if you lived in a cheap place. I live on long island it its impossible to save here. WWhat makes it worse is that I have a great civil service job that I cant find in any other state so moving is not an option.
@falc: “life will get in the way” .. All the more reason to save even more money yet. Learn from the squirrels, my friend. Learn from the squirrels.
@majortom1981: That’s negative thinking. Impossible to save? I’ll bet you spend money on things you don’t need, that you could be saving instead. Hint: You don’t “need” a computer, a TV, video games, or a $10 hamburger at a local restaurant when you can cook one yourself for 50 cents. Moving is not an option? Yeah, right. Moving is always an option. You could always find a new line of work.
I’m not trying to get on your case or anything. My point is, you can’t say “I’m stuck here and can’t move and can’t save” – that’s a bunch of baloney. You may choose to be stuck there and not save because you are unwilling to make certain sacrifices, but that’s not “I can’t”, it’s “I choose not to.”
@falc: It is well known that invading aliens are rendered powerless by the sight of bouncing orange savings balls.
Hmmm? If you live in the SW (CA/AZ), you can easily spend $300 a month on electric bills in the summer. To heat a house in other areas during the winter can total as much or more. Cable tv/phone/internet bills are about $100 a month packaged. Maybe you can buy a solar powered house before retiring but $16k is not alot even if your home and car are paid for.
@Saboth:
@nequam:
Nequam for the win.
Exactly! The article isn’t about “inflation” or “quality of life” or what “retirement” age will be – it’s about how to get to a particular number….
@jimconsumer:
Great advice. You don’t need to do anything whatsoever to enjoy your life! Just work and save, work and save!
For a lot of people, saving $50-$100 a month and not having a computer, television, or ever eating out for 30 years isn’t very worthwhile. I’m all for saving and manage to save about a grand a month myself right now, but there are a great many people living under tighter conditions than I who are going to find it hard to live an ascetic lifestyle for piddly savings.
With the increasing numbers of working poor in America, this sort of problem is only going to get worse and the solution is not for people to eat ramen, beans and canned vegetables their entire lives while sitting in an empty room in order to save for retirement.
@K-Bo:
Here is a really basic investment tip.
I’m 35 and have been putting away 15% of my income in retirement (or 15K whatever comes first since age 23. I WISH someone told me about this when I was in my 20′s.
* An investment earning 6% will double in 12 years (72 divided by 6)
* An investment earning 8% will double in 9 years (72 divided by 8)
* An investment earning 10% will double in 7.2 years (72 divided by 10)
* An investment earning 12% will double in 6 years (72 divided by 12)
* An investment earning 20% will double in 3.6 years (72 divided by 20)
So the market averages 12% since inception.
So if you double every 6 years, think about puting away 4K in a ROTH IRA at 25 = 1,024,000 at age 65.
Do that 3-4 years in a row (16K total), and you end up with 4,096,000.00.
Do it every year, and (you do the math). AND IT IS TAX FREE WHEN YOU RETIRE!!!!!!!!!
Save young, work hard, pack it away, you won’t regret it when you hit your first 1M by the age of 36.
Retire? No one’s going to retire completely. Only the sick and disabled will be able to “not work”. We’re only going to take on a new job “to be described at a later date”.
So what’s a good savings account to put money into? I have a roth IRA however I want to put money into something else long term (while keeping the Roth IRA) because I am 32 years old and don’t want to depend on SSI being around when I retire.
crap…I just noticed I’m only putting $50 into my Roth IRA per *month*. Since I just paid my car off I’ll increase it to $150 per month. Is that a good amount? (Directed at anybody listening)
I read all these comments hoping maybe someone had a tip for painless retirement planning but no such luck. For all those who say that saying that its too expensive or that they cant afford to retire, I managed to save 10% of my income last year and I only made 29G. I own a house, pay student loans and still even managed to live a little. Yes there were months that life was still more restrained than I would have preferred but seeing my 79 year old grandmother getting closer to the end of her life savings says that I should save every dime I can.
100% stocks doesn’t make sense no matter what age. You’re taking on way too much risk.
@realserendipity:
Some advice, since you want some:
1. Save money in a foreign country if possible. Money in term deposits in a foreign bank could make more than at home, and may not be taxable in the US (check the law, since IANAL or an accountant).
2. Buy shares in stable companies (e.g. IBM) for the long haul, 5 to 10 years or longer. If you get qualified shares, the dividends are not taxable income, and you can sell the shares later.
[www.irs.gov]
3. Work overseas, if possible. The first US$70000 you earn in foreign countries is not reportable (US government employees lose that exemption). I worked in Korea which has total income taxes and deductions of 5%, and some of that can be repaid to you when you leave the country. There are plenty of other countries with ridiculously low income tax rates and high wages for skilled labour where you can save thousands of dollars annually: Japan, Taiwan, UAE, etc.
4. Retire in a poor but stable foreign country, not at home. US$1200/month in the Philippines offers the same quality of life as US$4000/month in the US.
Every 286 dollars you put into your savings at 25 will be worth about 70 dollars by the time you’re 65, due to inflation.
A lot of people are missing the point, intentionally or otherwise.
1. Yes, inflation erodes the value of your money. This is why you should save in instruments which beat inflation. Depending on your risk profile this can mean shares, bonds, or a high interest savings account.
2. Nobody said a million dollars would be enough to retire on. This is about compound interest and the simple fact that you do NOT need to save a million to get a million. $286 a month is $137,280 over forty years. Yes your million will be worth less, but you didn’t SAVE a million dollars and lose value on it – at least if you saved consistently at an inflation beating rate.
3. There is no such thing as “painless” retirement planning. No one is entitled to spend more than they earn and expect an easy ride when their income suddenly drops 20 years before they die. The whole concept of social security and retirement is built on an assumption that the growth of the economy will absorb the growth of population – this is not sustainable.
A million in 30 years? What will it be worth in 30 years under the domination of chinese currency?
@befrugalnotcheap: Well $150 is probably not enough if you want $1 million by age 65! If you’ve saved $0 so far, you should save $671 a month. I know that’s probably too much but just use that as a guide.
You can also use this calculator tool to see how much you should save. [cgi.money.cnn.com]
Enter your info in Box 2 since your Roth IRA is a tax-deferred account.
Also, a Roth IRA is great to have but if I were you, I’d have some aggressive funds in it since you have over 30 years until you need the money.
If your employer has a 401(k), that can be a great option if they match contributions.
@normanm4: It’ll probably be worth around 1/4 of what it is now. That’s assuming that Chinese currency isn’t doing worse than the US Dollar…
This is not a how to – it’s just simple division. I can do that – what I can’t do is figure out how to save $670 dollars a month!
@olivia2.0: No, it’s not just simple division because the numbers are taking into account compounding interest at 8%. The point of the article is more that you have to save less per month (and less of your own money over all) if you start saving early.