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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35 Comments

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crimeslawyer

Don't bother putting it in the bank because they will pay almost zero interest on your savings. The government has managed to keep interest rates arfifically low so they can pay off their debt at below market rates while screwing the seniors with bank accounts for retirement.

August 23 2012 at 2:19 PM Report abuse rate up rate down Reply
tsulentic

Here's a difficult path to reach this goal, continue to vote for Democrats.

August 22 2012 at 4:06 PM Report abuse rate up rate down Reply
mrknobs

Great advice for 1950. Too bad that saving for retirement is a pyramid scheme and we've run out of people on the bottom of the pyramid. Not to mention that even if this was somehow successful, $50k in 20 years will be enough for dinner and a movie. Also, lol @ making 10% on your money. ;)

August 22 2012 at 1:13 PM Report abuse rate up rate down Reply
2 replies to mrknobs's comment
xTRYANx

Mindless blabber...

And over the past 2 years the S&P is up 20%, 10 years it's up 50%. Get a new financial advisor ;)

August 22 2012 at 1:29 PM Report abuse rate up rate down Reply
RetiredWorking

In 1970 (42 years ago), dinner and a movie for two cost me less than $50. Today, it'd cost me less than $100. Of course, it's not fine dining, just your everyday restaurant. In 20 years, it'll prolly cost me less than $200. LOL on spending $50K on dinner and a movie.

September 08 2012 at 7:26 PM Report abuse rate up rate down Reply
masmanz

It is all on paper only. You will see your 401K grow and then it will hit a bubble and much of the gain gone. It will start growing again and will hit another bubble. You will hit at least 3 bubbles before retirement and will be lucky to get as much out as you put in. Do these guys guarantee anything? No, they just want your money.

August 22 2012 at 11:08 AM Report abuse rate up rate down Reply
bchrist751

Everything in the above articular is correct.... The secret to becoming financial independent is....Saving ( living below your needs) compound interest, and time.

its is a very simple formula but Most will never put for the effort and discipline to achieve the goal.

August 22 2012 at 10:37 AM Report abuse rate up rate down Reply
BasicBudget

Invest 10,000 in a stock selling for $ 1.00. When it goes to 10 sell it. Take the $ 100,000.00 invest in another $ 1.00 stock. When it goes to 10 you have your million.

August 22 2012 at 7:42 AM Report abuse rate up rate down Reply
ilm9p

Work hard and save your money? What a bunch of suckers! Go down to Social Security and tell them, " I gots the high blood and the sugar, my feets be hurting all the time, and my back be hurting too, and I's tired all the time, word, I know right". In three or four months you'll be getting a monthly check (tax free) and then you go down to the welfare office and sign up for free food, free healthcare, free Section 8 housing with free utilities and free cable TV, then you can send your kids to school to get free breakfast, free lunch, free school supplies, free clothes, free everthing! Work for a living? Come on, this is America, this is our time! Hope and Change, baby! Word to your Mothers.

August 22 2012 at 7:21 AM Report abuse -1 rate up rate down Reply
1 reply to ilm9p's comment
RetiredWorking

Suckers? LOL on that. While you're eating free hot dogs and government cheese, living in your low-income housing project, I'll be eating good healthy meals, taking vacations in exotic places, not worrying about getting evicted from my nice(fully paid for) home.AND my kids will inherit hundreds of thousands of transformative assets. When you ask me for a dollar, my wife will glare at you, but I'll gladly buy you a meal. Why? Because I pity you and the low-income life you and your children's children children are destined to live. I have my self-reliance, you have your Section 8. I have no problem paying for your government assistance, because I have pity for the children you will bring forth to live a life of poverty.

September 08 2012 at 7:36 PM Report abuse rate up rate down Reply
Rhianon

Oh puleeeeze.....now do this for people that make $8.50-$10.00hr. How about no car, can't afford one & live in an apt. How do these folks get a million dollars? Steal it or sell drugs.

August 21 2012 at 6:41 PM Report abuse +2 rate up rate down Reply
donut999

The message and intent of the article is good. The reality is a completely different matter. Very few families are going to be able to save at the rates suggested even if they are living within their means. The returns are not realistic without acknowledging the risk. How many found that out starting in 2007 and 2008? Single most frustrating thing I see today is the situation some seniors are in that had no chance of ever accumulating a million, but did manage to accumulate $100,000-200,000. They expected a safe return of 5% or so, or an average of $400 to $800 a month to supplement their SS. The rates paid today are a kick in the groin to all of us.

August 21 2012 at 4:36 PM Report abuse +1 rate up rate down Reply
randallalbin

in better economic times, there used to be compounded interest and savings strategies. is robin leach still alive and kicking? being conservative and rather frugal can help in storing up funds. alot of this is common sense financial management. why present a longer article such as this one is debateable

August 21 2012 at 3:42 PM Report abuse rate up rate down Reply