Now at this point, you’re probably wondering: Just how much money do you need to set aside each month to retire with $1 million or more? The answer: As little as $300.
Not convinced? Then consider this: If you put $300 into a retirement plan every month starting at age 22 and do so until you reach age 67, and your investments in that plan deliver an average annual 7% return (which we’ll talk more about in a bit), then you’ll retire with $1.03 million. Make it $500 a month, and you’re looking at $1.7 million. Of course, the more you’re able to set aside, the better, but the point is that with a long enough savings window, you can retire a millionaire without having to part with tons of money on a monthly basis.
2. Put your money into stocks
So now let’s talk about the 7% return we used in the example above. That return is a few percentage points below the stock market’s historic average, which leads to the second thing you’ll need to do: Go heavy on stocks.
If you start investing in your 20s, there’s no reason not to be aggressive, because you’ll have plenty of time to ride out stock market crashes and come out ahead. Stick to conservative investments, like bonds, and your chances of retiring a millionaire suddenly become a lot slimmer. To be clear, this doesn’t mean that no portion of your long-term savings should be in bonds. But during your 20s, and even your 30s, 40s, and much of your 50s, stocks are what you should focus on.