Retiring a millionaire may seem like a lofty goal, but considering the average American expects to need approximately $1.9 million to afford retirement, according to a survey from Charles Schwab, you may need to reach millionaire-status to enjoy your senior years comfortably.
If you're aiming to save at least $2 million by age 62, you'll need to start preparing early and saving consistently. Here's how much you'd need to save each month to reach that target, depending on the age you began saving.
How much does it cost to retire a millionaire?
The earlier you begin saving, the less you'll need to save each month to build a robust nest egg. That's because compound interest does most of the work for you, and the longer you let your money sit untouched in your retirement fund, the faster it will grow.
While reaching the $2 million mark by age 62 is far easier when you begin saving in your 20s, it's not necessarily impossible if you're off to a late start -- but you will need to set aside a hefty chunk of change each month. Assuming you're earning a 7% annual rate of return on your investments, this is how much you'd have to save every month depending on what age you started to save:
No matter when you begin saving, reaching $2 million is challenging. But the longer you wait, the more difficult it becomes. And unless you can afford to contribute several thousand dollars per month to your retirement fund, waiting too long to begin saving could make achieving your goal unlikely.
Keep in mind, though, that if you're investing in a 401(k) that offers employer matching contributions, you won't need to save as much on your own. That can make it easier to reach your goal, because a portion of your monthly savings will come from your employer.
What if you can't save $2 million?
Saving $2 million may not be feasible for many workers, but the good news is that you may not actually need to save this much.
How much you should save for retirement will depend on your unique financial situation, so instead of aiming for an arbitrary number, it's a good idea to determine a savings goal based on how much you expect to spend during your senior years. Run your numbers through a retirement calculator to get an estimate of how much you need to retire comfortably, then start saving toward that goal.
If that goal is still out of reach, that doesn't mean you're out of luck. See if you can tweak your budget to find more money to put toward your retirement savings, and think about how much you're willing to sacrifice. Remember, too, that if you're not willing or able to make financial sacrifices now, you may need to make them later by living on less in retirement.
You may also consider delaying retirement by a few years to give yourself more time to save. Waiting even just a year or two to retire can help boost your savings substantially, and when you're not spending as many years in retirement, you also won't need to save quite so much.
It's tough to retire in your early 60s with $2 million stashed in your retirement fund, but it's not impossible. Even if you can't reach this goal, though, saving as much as you can is better than saving nothing at all.