It’s all about investing! Mostly, it’s about investing consistently over the long term.
According to Investopedia, the S&P 500 has a yearly average return rate of 9.90% since 1928. Since adopting 500 stocks into the index in 1957, it’s actually 10.26%.
The reason this matters is because I’ll be showing you the math with an 8% return rate, to be on the conservative side. The only time I swing that way.
Starting at 20
Assuming you start with $0 dollars, if you invest $311 dollars per month for 40 years: you would wind up with over a million dollars.
So if you started investing this amount when you turn 20 by the time you’re 60 you’ll have enough for a good retirement without having had to sacrifice much, if anything, during your life.
Starting at 30
Let’s say you don’t know about investing throughout your 20s and when you turn 30 you finally realize you need to invest for your future.
So you start investing $710 dollars each month for the next 30 years. When you turn 60 you now have about 1 million dollars.
In this scenario, you do end up having to invest slightly more than double what you would have had to invest if you’d started a decade ago, but you’re still not having to invest a huge amount per month.
Starting at 40
Now let’s say that you realized in your 30s that you must invest for your future, but you were in a lot of debt and weren’t able to start investing at that time.
You start investing $1,758 dollars each month for the next 20 years. When you turn 60, you now have about 1 million dollars.
In this scenario, you would have to invest over a thousand dollars more per month than if you’d started a decade earlier, but depending on your salary and expenses it is still very much doable.
Starting at 50
In this last scenario, you would have to invest a considerable amount per year in order to be able to retire at 60 with a million dollars. If you have a very high income, or no expenses, it could still happen though.
In this last scenario, you could invest $5,552 per month for 10 years in order to end up with 1 million dollars by 60 years old.
If you’re starting here, and don’t think you can handle contributing $5,552 per month, you can figure out what is doable for your situation and contribute that.
Remember that the important thing is that you have some retirement funds so you don’t have to depend on others. Besides, depending on what your expenses are, you might need a lot less than 1 million dollars.
A million is just a common number to shoot for. Not everyone needs that though. Do the math for yourself and figure out what you would like to have.
Personally, I’m shooting for $750k.
Remember
The important thing is that you invest and start as early as possible for you.
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