How To Become A Millionaire By 65
January 22nd, 2008 | Published in Retirement | 5 Comments
That’s right, follow the simple plan outlined by Kiplinger’s Personal Finance and you will be a millionaire by the age of 65 starting with $0 right now… guaranteed or your money back!
You’re 25 Now
Save $286 a month and you’ll be a millionaire by 65. Contribute to your 401k to get your company match, put 100% into stocks, pay down high interest debt like credit cards, and set up an emergency fund equal to six to twelve months of your expenses.
You’re 35 Now
Save $671 a month, or $304 if you already have $50k banked. Look to save 15% of your salary including your employer match in a 401(k), shift your assets to 90% stocks and 10% bonds, then start contributing to a 529 plan if you have kids (or plan to have kids).
You’re 45 Now
If you’re starting some scratch, you need to put away $1,698 a month. If you started with $50k then it’s only $1,298 a month. Happen to have $100k lying around? Then you only need $861 a month to reach a million. At this point you should be 20% bonds, 80% stocks and trying to maximize your 401(k) contributions. Remember retirement and don’t put your children’s college costs ahead of it.
You’re 55 Now
Ten years until your 65, so you’ll need to save $5,466 per month to reach a million. If you have $100k saved away, you’re down to $4,253 a month. Gotten up to $200k? Good job, that’ll be $3,040 a month. At this point you should be taking advantage of the $5,000 catch-up contribution bonus to your 401(k), shifting your allocation to 70% stocks and 30% bonds, and thinking about working a little longer if you’re short.
There you go! The path to millionaire status is clear, courtesy of Kiplingers.
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January 22nd, 2008 at 7:43 pm (#)
I kind of scoffed at this article when I read it. (It had nice glossy pictures of people at various stages in life.) Reason: the numbers given will get you to $1 million in nominal dollars when you’re 65.
To get to the equivalent of $1 million in today’s purchasing powers, your savings plan will need to be slightly different.
You’re 25 Now
Save $934 a month and you’ll be a millionaire by 65.
You’re 35 Now
Save $1,629 a month, or $1,262 if you already have $50k banked.
You’re 45 Now
If you’re starting some scratch, you need to put away $3,066 a month. If you started with $50k then it’s only $2,648 a month. Happen to have $100k lying around? Then you only need $2,230 a month to reach a million.
You’re 55 Now
Ten years until your 65, so you’ll need to save $7,346 per month to reach a million. If you have $100k saved away, you’re down to $6,133 a month. Gotten up to $200k? Good job, that’ll be $4,919 a month.
If your goal is to have $1 million in purchasing power at 65, then just following Kiplinger’s advice won’t get you there. I’d ask for my money back; buy a spreadsheet program, teach yourself some time-value-of-money math, and you’d be better off than following Kiplinger.
(I actually love Kiplinger for the most part, but I hate it when magazines give advice on getting to $1 million by age 65, since that won’t be enough for most people to retire comfortably due to inflation.)
January 22nd, 2008 at 9:47 pm (#)
Excellent post Lily! I’m 24 and I’m not aiming for a million dollars at age 65. I want to live comfortably! I’ll need about 5 million with inflation factoring in.
January 23rd, 2008 at 12:28 am (#)
I’m 23.
With any luck, your income will keep pace with inflation and it will be easier to save the inflation-adjusted amounts.
January 24th, 2008 at 11:47 am (#)
Lily, you’re right, that is nominal and sometimes people just need something to spur them to action you know? For those of us who are more responsible, we obviously would like to know $1M in PP but the general public would be scared of the “real” larger numbers. $934 is scarier than $286!
(incidentally I’m 27, so we’re all in the same ballpark!)
May 18th, 2008 at 11:41 am (#)
I think both of you have great points and are doing very well. Alot of people are age dont think of Saving for Retirement. I was 18 when I first started I still lived at home and put 15% in my 401k. I made the mistake and cashed out 2 years later when I left my job. So I started a new 401k when I was 23 Saved for 3 years at 8 to 10% and cashed out again when I left. Im now 29 years old I currently put 11% with a 4% match into my 401k. I could have had 30 to 40 thousand in a Ira if I would have been smart enough to roll it over into a IRA. Any how Im Making 50,000.00 per year W/ Overtime. My plan is to retire rich. So my advice is to keep up the great work. Keep that going and if you leave your current employer roll it over.