When you think about saving 1 million dollars in 10 years, do you think it’s possible? What if I told you it was?
Let’s talk about the beauty of compound interest, a few years, and being diligent with your savings! It’s time to figure out how to save 1 million dollars in 10 years!
How old is the average millionaire?
Before we get too deep into tactics and theory, let’s talk about some other pressing questions that you likely have….such as, “How old is the average millionaire?”
The average millionaire is 57 years old. And, over 40% of people in America who are millionaires are over 50. So, if you’re not a millionaire yet, no worries, you have plenty of time.
You want to save up a million bucks…but you don’t want it to take forever. Or, may you’re too old to patiently wait forever! How long will it take to save 1 million dollars?!
You’re not going to like this answer, but it will depend on your situation and how much you can realistically save over the course of your career.
For example, if you can only invest $10 a week, it may take you a little longer than someone who can do a few hundred.
However, the average person will take around 20-30 years to save a million dollars. But if you’re willing to save more and start a bit earlier, you could potentially save it in half the time.
How much do I need to save to have a million dollars in 10 years?
How much do you have to save to be a millionaire in 10 years?
If you were to start at the beginning of 2022, and give yourself 10 years to save a million bucks, you’ll need to save around $5,500 a month for the next 10 years. This is based on interest growth of 8% on your investments. Of course, the interest rate could be more based on if you’re saving more in stocks or bonds, but 8% is normal.
Can I save a million dollars in 20 years?
Okay, maybe 10 years was a little aggressive… But what does it take to save a million dollars in 20 years? Is it doable for you?
Using the same calculation method as we did above, you’d need to save around $2,000 a month to save up a million dollars in 20 years.
Of course, the earlier you start, the better chance you have of taking advantage of compound interest. And, if you’re willing to take slightly riskier moves, you could get higher rates of returns and reach that goal faster.
Just like with our calculations above and assuming everything stays the same, you’d need to save about $3,000 a month to be a millionaire in 15 years.
As you can see, the longer you have to save, and the earlier you start, the less you need to save upfront. It seems much more feasible to save $2k-$3k a month than almost $6,000. But, if you can swing it, it is possible to retire after 10 years of intense saving.
Can you retire on 1.5 million comfortably?
Maybe you think $1 million isn’t enough. Can you retire on 1.5 million comfortably?
Yes, you can!
In fact, many people retire, or retire early, with less.
The key is to make sure you don’t inflate your lifestyle, and also keep a watchful eye over your investments. If you’re money-smart and can manage your money well, you can certainly retire on 1.5 million comfortably today.
What Percentage of Americans Have $1000000 in Savings?
Before we dive too deeply into the numbers, it would be helpful to know how many people have $1,000,000 in savings today! Because most are getting along just fine. Do they have a million dollars? Or are they living on even less than that?
So what is it? What percentage of retirees have a million dollars?
According to a survey by TD Ameritrade, on average, 10% of Americans have $1 million dollars or more in their retirement savings (see the chart below).
So if you have (or will have) a million dollars in savings, you’ll certainly be better than average!
Now the question is, what does a million dollars get you? Will you earn a lot with a million dollars? Or will it be far less than you expect?
How Much Interest Does $1 Million Dollars Earn Per Year?
If you were able to save up that heap of cash, how much interest would 1 million earn per year?
The question of ‘how much can a million dollars generate per year’ is a great one, but truthfully it’s not the easiest answer to give since there are so many investment options.
Based on my research and my experience, you can expect to get the below rates for the respective investments.
- Savings: 0.5%
- Certificate of Deposit: 0.65%
- Short term government bond: 1%
- Short term corporate bond: 2-3%
- Annuity: 3%
- Real Estate: 7%
- S&P 500 Index Fund: 10%
The real estate percentage is Derek’s estimate based on the crazy price of homes today (rental rates have not kept up with housing prices). And, the S&P 500 is based on the historical average when including dividend reinvestment.
So now to answer the question of “how much interest would 1 million earn per year?”
- With a 0.5% savings account: $5,000 a year
- 1% government bond: $10,000 a year
- 3% annuity: $30,000 a year
- 7% real estate: $70,000 a year
- And, 10% in S&P 500: $100,000 per year
Seems like a no-brainer on which investment to go with, right? Not so fast. There’s also the factor of risk. Putting your million dollars in the stock market is much more risky than putting it into a savings account. Be sure to take that into account.
How to save a million dollars in one year?
For the most part, you’d need to already be a millionaire to save a million dollars in one year. And if you are a millionaire, I highly suggest talking to a finance professional so you can continue to grow that amount!
There are some ways to save a million dollars in one year, but they’re not easy! Want to know more? Check out the post linked below.
How can I build my wealth in 10 years?
Want to know how to save $1 million for retirement?
Now that you know that saving 1 million dollars in 10 years is possible, let’s talk about how to actually build wealth in that 10 years.
1) Start Saving Right Now
The best thing you can do for your future self is to start saving and investing your money right now. the longer the money has time to “work”, the faster it compounds.
Now, this is not to say that you should have started investing at 18 or right when you got your first job. BUT, if you have the funds to start saving, do it! Your future self will thank you.
2) Choose Riskier Investments In The Beginning (And Not Later in Life!)
The younger you are and the more time you have when you start investing, the riskier you can make your investments.
This doesn’t mean making unwise financial decisions. Don’t go putting all of your money into one company or stock. But, don’t be afraid to take a few risks that could pay off for you financially.
As an example, the average portfolio is around 60% stocks and 40% bonds and cash. But, if you invested in stocks at 80% for the first few years, and they paid off, you could bring in more money.
3 out of 4 millionaires in a recent survey said that regular and consistent investing is essential. In other words, saving money consistently — like the same time every week or month — is better than just investing when you feel like it.
And, investing regularly can also help you prepare for the future. If you know that based on your investments that you’ll have a million dollars in the next 15 years, you’re less likely to stop saving!
4) Pay Off Your Debt
No one wants to go into retirement with debt hanging over their head. While it can be better to invest at the same time as paying off debt, the biggest goal should be debt freedom. This includes paying off high-interest debt, student loans, and even your mortgage if possible.
And, the faster you pay off debt, the quicker you can throw that extra money at investing, thus saving even more!
5) Cut Costs Where You Can
I’m not saying you have to live like a monk. But, by living more affordably, you’ll be able to save more and even live longer on your retirement.
(For example, a million dollars can last 20 years if you can live on $50,000 or less a year. But, if you need to spend $100k a year, it will only last 10 years.)
By cutting costs and learning to live with less, you can make sure your retirement fund lasts longer, which means you can enjoy retirement longer too!
In addition to a nest egg, try building up your passive income.
This could be through…
- real estate,
- a turn-key business,
- or even investing in options that pay you dividends.
The great part about passive income? You earn it consistently month to month or year to year. So if you’re able to build it up enough, you won’t even have to touch your retirement. You can live exclusively off of your passive income instead.
7) Take Advantage Of Catch-Up Contributions
Are you over 50 years old? If so, take advantage of catch-up contributions!
In 2022, you can contribute an additional $1,000 to your IRA, on top of the standard $6,000 contribution limit.
If you’re participating in a 401(k) participants, the catch-up contribution limit is $6,500 for 2022, on top of the $20,500 annual contribution for 2022.
If you’re trying to save more money and prepare for retirement, this is a great way to do that.
Saving 1 Million Dollars In 10 Years? It’s Possible!
So, is saving 1 million dollars in 10 years possible?
Absolutely. We’ve proven that above.
Of course, if you’re able to give yourself more time, you’ll be able to save less over a longer period. But that doesn’t mean that it’s completely impossible.
And remember, let compound interest do its thing! You never know, the market just may be in your favor.
Are you ready to start saving 1 million dollars in 10 years? What’s your plan?
AUTHOR Kimberly Studdard
Kim Studdard is a strategy consultant and course launching expert. When she isn't spending time with her daughter and husband, or crying over This Is Us, you'll find her teaching other mompreneurs how to scale their business without scaling their workload.