Robin Leach on Lifestyles of the Rich and Famous.  (Getty Images)

One million dollars may not be enough to buy you a spot on Lifestyles of the Rich and Famous, but it's still a life-changing amount of money. With $1 million, a paid-off home, no other debts, independent children, and reasonably good health, it's possible to live a long, reasonably comfortable retirement in most parts of the country.

For most of us, however, that $1 million seems like a very tough target to reach. With median household incomes around $50,000 per year, hitting that magic million-dollar target would require socking away some 20 years' worth of that typical income.

On its surface, that seems preposterous, especially after taking taxes and the basic costs of living and raising a family into consideration.

Yet as crazy as that $1 million target may seem, it's actually possible to reach for nearly anyone with steady work and the discipline to consistently sock away a little bit every month.

Here's How

If you've got access to a 401(k), 403(b), or other employer-sponsored retirement plan, the discipline to reach a million dollars in savings is just a few signup forms away.

Sign up for automatic paycheck deductions. Add to that automatic investment both the immediate tax deduction from contributing to a "traditional" 401(k) type plan -- and potential for an employer match -- and that path to $1 million gets even easier.

When you also include a healthy dose of time to save and potential returns you can get on your investment, becoming that future millionaire becomes downright achievable.

Indeed, if you start early enough and earn strong enough returns, you may be able to get away with needing to save only a small fraction of that $1 million. Time -- and rate of return -- will take care of the rest.

As the table below shows, there's a very clear trade-off between the rate of return you earn, the amount you can put away each month, and the time it takes to reach that $1 million mark:

Monthly Savings Annual Return Rate Years It Takes to Reach $1 Million Total Lifetime Amount Saved Percentage of a $50,000 Annual Income
$100 10% 44.5 $53,500 2.4%
$200 8% 44.3 $106,600 4.8%
$400 6% 43.5 $208,800 9.6%
$600 4% 47.1 $339,600 14.4%
$800 10% 24.5 $235,200 19.2%
$1,000 8% 25.5 $307,000 24%
$1,200 6% 27.4 $396,000 28.8%
$1,416 10% 19.4 $329,928 34%

Source: Author's calculations.

All of those "monthly savings" amounts are reachable within a typical 401(k). That $1,416 monthly amount works out to about $17,000 per year, the 2012 contribution limit for those under 50. While it's true that those able to sock the most away generally hit that $1 million mark the soonest, check out the numbers near the top of the table.


If you start early enough and sustain a strong enough return, you can reach that $1 million mark within an ordinary lifetime of working , even by saving a mere $100 a month -- or about 2.4% of that $50,000 income. That's less than $4 a day, which should be well within the realm of possibility for most people who are truly dedicated to improving their futures.

Use "Other People's Money"

Even better, it's likely that you won't even have to come up with that $100 a month all on your own. Indeed, it could potentially cost you about half as much. Effectively, you'd be instantly doubling your investment if you're in the 25% tax bracket and benefit from a 50% employer match. The table below shows how $100 can be added to your account while it would only cost you $50 in spending money:

Contribution Amount $66.67
Employer Match (50%) $33.33
Total Added to Account $100.00
Tax Savings (25% bracket) $16.67
Out-of-Pocket Cost: $50.00
Source: Author's calculations.

That less-than-$4-a-day cost to hit that $100-a-month target just became less than $2 a day in foregone spending, to get you from $0 to millionaire status within a typical working lifetime.

And when you consider that the money can come straight out of your paycheck so that you'll never miss it -- it becomes pretty obvious that there's really no easier way to reach $1 million.


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