set aside monthly, starting at different ages, and under different rates of
return, to end up with $1,000,000 in savings when you are ready to retire at
Here is how much you would need to save each month at a 6% annual rate of
return, starting at different ages.
So if you're 20, and you want to retire a millionaire, you should be socking
away $361 per month. If you're starting at 25, that jumps to $499. You can see
how as you get older, you need to be saving much, much more:
Bottom line: It is much better to start saving young. Two things are
happening here. First, by starting to save at 20 instead of 40, you have many
more individual monthly payments, and can spread out your total principal
investment over a longer period of time.
Second, and much more importantly, by saving earlier, you can better take
advantage of compound interest. If you start saving when you are 20, your first
payment of $361.04 will, at 6% return, grow into $5336.16 when you are 65.
How much you need to save also depends on the return rate. This chart
shows how much you need to put into your savings account each month for a
variety of annual return rates: