Accomplishing Your Million Dollar Savings Goal

Real Estate

While a million dollars isn't what it used to be, for most of us it would be a big step up. Plus, if you can save a million, two or three million may be in your future. Are such savings really possible for you?

Anything is possible. When it comes to saving a given amount of money, time is of the essence. Let's look at a table to see what it would take on a monthly basis to save a million dollars:


As you can see, the earlier you start, the less you’re required to save each month. While this makes sense, it's surprising just how much more you have to save if you wait. For example, at an 8% return, you only have to save $126.08/month to save a million dollars in 50 years. But you have to save almost $5,500 a month to accomplish the same thing in 10 years. Ouch.

By the same token, the longer the investment period, the more significant the rate of return becomes. Look at the 10-year time frame; the difference isn't that large between the amounts of savings required at 2% and 8% (about 38% more). The difference at 50-years is a little over 670% between the two corresponding values.

So it's best to start as soon as possible and to attempt to get the greatest rate of return that you can.

But let's get practical, few of us have the foresight to start saving at 15 or 20 years of age. We have more important things to do and we always think there will be plenty of time for that later.


Let's assume, instead, that you have a timeframe of 30 years. It’s reasonable to expect a return of 10.8% over the long-term; this is the historic stock market return. As you can see, that would require a monthly savings of approximately $373. Now we're in territory that may be very feasible for you. 


A few keys to keep in mind: 

Utilize any employer matching contributions. This is the first place to look for help. Matching contributions to your 401k are like a raise. Not only will your employer give you money, but also your own contributions are pre-tax.

Use tax-deferred accounts. The numbers above assume that you do not have to pay taxes on your profits as you accumulate them. This means focusing on 401k, IRA, and similar accounts.

Leave the money alone! Every dollar you save is worth $25.16 in 30 years at 10.8%. Every dollar you spend is costing you significantly over time. So that $20 knickknack you just have to own is really costing you over $503.20. Only buy things that you either truly need or truly love.

Be patient. Your savings grow much more quickly at the end than they do at the beginning.

Saving a million dollars is well within the reach of most people. The real issue is time. Time allows even someone with a lower income to accumulate real wealth over the long haul. This means the time to get started is today, not tomorrow, and certainly not next year.

Start saving today and you'll be pleased with the results.

A million dollars might not be what it used to be, but it's not too shabby either!