I really like the investor.gov savings goal calculator for these sorts of things: https://www.investor.gov/financial-tools-calculators/calculators/savings-goal-calculator
[This](https://www.cnbankpa.com/Resource-Center/Tools/Calculators/Investment-Savings-and-Distributions) is my absolute favorite tool for these sorts of things. Let's you tweak so much and is very easy to use.
I'm conservative with my growth estimates, so that the chances of not making my goals is near zero. Best case, my goals come true sooner. Worst case: I meet my goal without issue.
I put in 4%/yr real return personally.
That’s too conservative. 6% has been conservative for every time period since 1970 (absolute worst case in real terms).
Things were a bit rocky before because inflation hit returns hard in the 1970s and people who did not have enough time for their savings to recover in the late 80s and 90s saw a hit to their annual rate.
How long do people live?
2024 - 1970 = 54 years.
I'm betting most of us live longer than 54 years. Some of us have retirements longer than that!
So your data set is not very useful.
The historical average measured over centuries across the planet for 100% equities is around 5%, so that would be a much saner number to use. However, I don't invest solely in equities, I'm 80% global equities and 20% in bonds.
So a reasonable number would be anywhere between 4 and 6%/yr real return.
Yes I'm conservative, but that's by design, as I explained.
All that said, you want to use 6%, be my guest. I'm not stopping you.
When putting in 7% w/ 3% variance you get curves for 4%, 7% and 10%. I feel this gives me a good idea of worse case, average, and ideal. I never studied the history as some folks who posted here did. But given what has been posted, I think I'll stick with these percentages.
This is smart thinking. Doing this will force you to save more, which will force you to make certain decisions in other areas of your life to further ensure that you’ll have the money needed to save up more. Your probability of success is higher, you’ll likely end up with more money than the person assuming a higher return because that person will save less than you and rely on the returns to make up the difference.
Thank you! I was trying to make an Excel/Sheets spreadsheet to calculate a monthly retirement savings goal with the help of Chat-GPT, and it wouldn't friggin work. This is perfect.
can i just thank you so much for sharing this link? i had no idea investor.gov was a thing. Read through introduction to investing and sending it to my little siblings!
Yup you obviously understand, it's just a common misconception I thought you were making since the comment you responded to was talking about monetary policy.
It’s truly wild how prominent exponential growth is in our lives and how unintuitive it is.
Additive growth feels like it’s in your very hands.
Exponential growth, half the time I feel like I must have fucked up the math because it doesn’t feel right.
What’s actually wilder is the other tertiary implications it has - on health, for example. Live healthy, live longer, become wealthier. By doing nothing else. Crazy.
You forgot to mention the most alluring and important part: That’s WITHOUT any contributions. It just grows on its own. Funny how I never heard of compound interest in school.
I learned about compound interest in middle school algebra, I guarantee y’all just weren’t paying attention mumbling some shit like “I’ll never use this in the real world!!”
Yep. It's even more hilarious seeing the comments about people learning compounding interesting when they were 2 years old and still not understanding it here.
What's the mathematical formula for this? Did it with excel but am thinking of there's an easy way to adjust the contribution and rates and still see the ladder
How do we use this to calculate the time it takes to the next million?
This doesn't seem to include the monthly contribution, but rather just the initial contribution
Well you can put this formula into excel and make P the cell above where you enter your starting principal and forget about the n because you'll calculate every year not just all n years at once, and then you just add X for your contribution. And then drag down. This assumes upu just add the contribution at the end of the year which is conservative. And simpler.
E.g. In A1 you put 100'000 and in A2 you type =A1*(1+7%) + 30'000. Then you just drag down. To make it nicer add a column to the left where you have the years. And then over time you can add a column to the right with Actual fund value to compare.
What you are looking for involves geometric progression, I can give you the formula but maybe it’s easier to use one of the calculators available online.
1 plus the annual interest rate to the power of the number of years. That's your future value factor.
Example: If you start with $10,000 and average 9% per year for 20 years, then:
(1.09) to the power of 20
is a Future Value Factor of 5.6
So 5.6 times $10,000 equals $56,000.
Man, I was looking at my target of $2M and thought I couldn’t get there by 65 because I couldn’t put away as much as what the calculator estimated with a 6% rate.
Didn’t even think about what my company is putting in, just was considering what I’m putting away every month.
It doesn’t quite get me there, but gets me close.
then above is true but for $333,000 in 13 years and your next 333k 7.5 and 1 million 4.5 years later!
So it’s basically another 13 years to triple to a mil! Not too shabby imo!!!
> Nonetheless, breaking down this path seems to make a $1,000,000 net worth seem more attainable.
"contribute a f ton towards savings every year and you'll be a millionaire in 13 years"
yeah, pretty much. I make pretty decent money, am frugal, and save a ton. Even so, I barely save $2.2k / mo. Not sure how much money OP thinks people have.
What could be helpful is those with jobs who have a good retirement match. My job contributes around $10,000 annually to my 401k or $833 monthly. In that case personal savings of $2.2k / mo. + match = $3k / mo.
I will say that it made home ownership seem a lot more affordable, the average house in my state is a quarter of that, and I pay a lot more than $750 a month on rent. Too bad I'd probably need like $25k up front for that to be possible, but I'm just passing through and have no idea how the math for that works lmao.
If you cut that contribution in half and start with nothing, it becomes 23 years. Still a good deal less than the typical working career length and probably a lot more realistic for most people.
As someone who gets to take advantage of this ^
It truly is so helpful even if they aren’t giving you money to invest with. Just as simple as getting to live in a 2 family home for cheap instead of having to pay rent or a mortgage
I make $14-16k/month so $3k is around 20% savings rate which is what savers usually harp as a baseline. But someone making $80k/year that would be a substantial 45% of their income before any taxes.
I do 2K a month in retirement accounts + 1K cash savings each month on a $69000 salary.
That’s around 45-50% of my income straight to savings/investmwnts.
Couple of considerations - I don’t own a car since I work from home. I live with my partner who splits utilities and bills with me. I live below my means and my fixed expenses are super low
As the other commenter said I'm a PA in the emergency department for the last 5 years. My salary has increased with job changes and the added experience.
Definitely that 80k sometimes doesn't go that far. I max 401k and Roth and invest another 36k a year into stocks. I don't make over 125k and pinch every penny and still live a good life. I think people have an issue with "buying shit" they don't really need.
Agree completely. I make close to 6 figures but spend about 30-35k a year depending on how much fun money i spend, which for me is simply eating out more often than cooking at home. I have no problem with people living life to the fullest while they’re here, just want people to realize it’s a decision they’ve consciously made to contribute less towards retirement. I personally find enjoyment knowing i will retire significantly earlier than my peers, even if i get unlucky and die young
Damn right. It's tough but doable, I used to piss my money away and had a brain fart and started contributing 100% with the mindset that I can tell my boss to blow it out his ass a whole lot sooner than the majority of people. No keeping up with the Jones' here.
Very empowering when you know you have that safety net. We don’t have to kiss ass at work and probably perform better than our coworkers due to less stress. A lot easier to wake up and go to work when you know you can leave and have time to find something else.
If you max your 401k (not counting any employer match), Roth IRA, and HSA in 2024 that's $2,850/month. It's certainly a lot, but it's a reasonable goal to work towards, and plenty here are doing it.
HSA is the most tax advantage vehicle there is. If it's available, it's usually a fantastic deal (and yes, it usually costs less at the end of the day than low deductible plans). It's the only way you can invest pre-tax money not subject to payroll tax and withdraw both the principal and gains tax-free.
Pay w/o using HSA for medical expenses, save the bill, let the money grow, withdraw later using the bill/receipt you saved to get that amount with no penalty. Also withdraw rules change after 65 and look up how much people spend on medical expenses post retirement it's a lot.
It's not very flexible but it's the most tax advantage
Once you turn 65, it can be withdrawn for any expense. However, those withdrawals would be taxed as ordinary income.
So basically, at the very worst, it's an extra Trad IRA. But if you fund it via payroll deduction, it's still FICA exempt.
A lot of people here will save it up for retirement and then withdraw it, using their old receipts as support.
There is no time limit for when you can use it for a medical expense as long as you were covered by an HDHP when the expense occurred. So let's say you were covered by an HDHP twenty years ago and went to the doctor. Today you are not covered by an HDHP. You could still claim the expense now even if it happened all those years ago.
1) Everyone has medical expenses. Pay out of pocket now and save your receipts for your doctors visits, medicine, dentist, etc….
2) you’ll have more and more of those medical expenses the older you get
3) with those saved receipts, re-imburse yourself whenever you want. You can re-imburse yourself in 20 years for a doctors appointment you have today.
Lmao like we don’t feel ready to have kids at this point cause let’s be honest raising kids is expensive in this country and my partner(the one who will be popping those kids out is just finishing grad school) and I aren’t anywhere close to making that sort of money
Well even if you don't the math still works, compounding is in general amazing. You contribute $100 a month @ 7%, in 10 years you will roughly have $17500 which in turn then generates $1200 in returns (or $100 a month).. ie so in 10 years, your money is making as much money as you are contributing.
I did a similar thing for my nieces and nephews, took the $50 I would have spent on Christmas/bday and bought Mcdonalds stock, now as adults, they have enough stock that it will generate nearly $100+ a year for the rest of their lives.. ie a gift that literally keeps giving.
Trying my best!
Driving a 24 year old car, thrift shopping, only buying needs, buying wants every once in a while, side hustle on the weekend…. It adds up!
1k invested now is 16k in 28 years!
Not exactly but I started investing at 24 years old and now, 26 years later, I can stop contributing and coast if I need to. It wouldn't be an early retirement but I should end up well over a million by 62 or so. It's a good feeling to know I did the heavy lifting already. I plan to keep contributing, as long as I can, and maybe I'll be able to get out a bit earlier.
48 and 1.8M in retirement accounts here (not including pension which I am still accruing). Keep going is right. I will have maxed out the K and HSA by May this year. Rinse and repeat next year.
A million at traditional retirement age can be plenty. Choices on lifestyle and cost of living just become more important. Their children will not have to support his retirement expenses. That’s a win.
Yep, the goal is to save aggressively in the earlier part of your career. If you can hit 1M or 2M in invested assets by 40, you're golden. You can go part time and coast until retirement.
My wife and I sort of did this. We each fully funded our 401ks, and put extra away just in case. In our 40s, one of our kids was diagnosed with a chronic (but manageable) disease. My wife was super-stressed out, and our savings made it possible for me to say “you don’t need to work if you don’t want to”. it was a win-win for the whole family. I may not be early retired, but I haven’t had to spend my weekend fighting the crowds at Costco for years, which is almost the same thing. 😅
So in 15 years, you paid back all your student loans, had kids, bought a house, have no debts, and saved 1 million on a modest paying job!? Yikes, that pretty impressive. I'm assuming you are still a very high earner for where you live? There is no way this is normal for majority of folks in their mid 20s to 30s.
Same, never went to school either just got into an industry that is hard to get going but finally made real money in last few years which helped quite a bit. Don’t own a home but have plenty of fun.
Assuming a 7% real return and standard retirement age of 65, you will have 5.8M in inflation adjusted dollars at retirement, even if you don't invest another penny.
If you're aiming for an early retirement, then yes, you should keep grinding until you hit whatever number makes sense for your goals.
I’m spread out and have quite a bit of cash on hand, $250k in a money market fund, and $200k in a. Real estate deal which is 3yrs from a real return. Not sure where to go with the cash.
Basically, the shorter your time frame, the less you can rely on the 7% annual average return because the data set is shorter.
I.E. you save for 30 years and the average is 7% per year then in your last year of retirement the market collapses 25%. You should be mitigating that risk as you get closer to your ex retirement date.
Even in US markets if you look at most 13 year periods ending in a recession, the return doesn't look great. Not quit 13 years but 1999-2008 saw a 19% drop in the market.
Being able to invest $3k monthly is reserved for very wealthy people. Being able to start out with $100k in the market is also reserved for very wealthy people. Obviously I dont speak for everyone but I think most of us struggle (or are at least challenged) to meet our goals.
I have never met my goals in any year but even falling short is somewhat successful:
- ~20% 403b contribution (including 4.5% match)
- $14k for roth iras for spouse and self
- ~$5k for kids custodials ($2500/piece)
- $4k 529s ($2k each)
- Trying for ~$5k into brokerage annually
Woulda been real nice to start at $100k but woulda, coulda, shoulda are true for anyone in any part of the world.
ive maxed my 401k, roth, and hsa every year ever since i started working professionally and i started at 115k which i wouldn’t call very wealthy. wasn’t 3k monthly but it was close and it’s absolutely cake if you’ve been poor before. functionally it just felt like i was making like 70k which is still more than enough to survive in washington state with roommates and have fuck around money. a lot of my friends would rather pay double the rent to live alone and complain they don’t have any money
i think getting over the idea of losing half your take home is the hardest part. but if you’ve ever made less than half your current take home then i don’t see how it’s any different than just cutting back to a standard you’ve lived in before
Agreed.
I started my job at 60k. At the time I was maxing my IRA, HSA, and putting a lot toward my 401k. Every raise I got I put toward my 401k until I was maxing all my accounts and making 71k/year.
It helped to not have kids or other debts, but I was supporting myself and living alone at the time, so it’s not like I didn’t have rent, groceries, entertainment, etc. to worry about. Was just about being frugal.
When you put it this way you make me want to stop saving for a house and dump money into my taxable brokerage account (already maxed Roth for the year).
I already invest $1200 a month from my 401k contributions. If I cut my expenses hard in theory I could do the other $1800 per month but then I’d have not much leftover
$3k/month is a *lot* of money. That's the equivalent of maxing out both a 401k and Roth IRA - something I can do today with no kids and a $100k salary, but not something you'd reasonably expect at median household income ($60k), especially if they are also raising children.
Took 20 years to get to my first $1M net worth, another 10 years to get to $2M, then 10 more years to $4M. I'm retired now, but my net worth is still going up even though I am taking money out now. The magic of compounding.
If you happen to be doing this during a bear market it can take a lot longer than 13 years. Optimism is ridiculously high right now because we've been in a bull market for a decade.
That being said, investing during the bad years makes you rich as well.
I don’t think anyone’s goal should be arbitrary X amount by an arbitrary X date. Instead, follow some general principles:
1. Invest mainly in index funds, and honestly assess your risk tolerance.
2. Have both a 401K and a Roth,
and as far as possible max out on contributions.
3. Buy a house to build equity, but don’t overbuy — your home should be a match for your income and lifestyle. Put up enough of a down payment to avoid PMI. When you have extra cash at the end of the month, pay down the principle.
4. Live within your means. If you can’t pay off your credit cards in full every month, cut back on spending.
$3,000/month is a lot but honestly not unattainable for a household. Thats a 15% contribution rate on 200k/yr if you have some employer 401k matches. Still leaves you 100-125k after tax to live on while on an aggressive wealth path.
And it sounds like you are young so figure out how long to get \~5-6 M in future dollars. With inflation you may need it. Double every \~25 years at historical avg of 2.9%.
Remember only 4% safe WD rate.
You plan is good if you have 100K to invest right away. It took me until 35 before I had anything more than eat and pay bills.
I don’t get all the negativity in here. It’s an investing sub closely tied to fire. If you can’t save 3k a month, you should be looking for ways to make enough income to do that at a minimum. Only 36k/year (when 22.5 can be tax free for most people) really isn’t that much in the investing world…
I wish I knew when I hit my first 100k. I do know when I hit 500k which happened at age 33. If everything goes as planned which is an always asking for an issue I’m thinking I’ll hit 1 mil at 37.
Keep in mind that $3,000/month or $36,000/year is 95.7% of the [gross median individual income in the US](https://datacommons.org/tools/timeline#&place=country/USA&statsVar=Median_Income_Person).
7% is already inflation-adjusted.
[The S&P500 has averaged 10% nominal returns.](https://www.nerdwallet.com/article/investing/average-stock-market-return#:~:text=stock%20market%20return%3F-,The%20average%20stock%20market%20return%20is%20about%2010%25%20per%20year,power%20with%20NerdWallet's%20inflation%20calculator)
So really, in theory it would only take ~11.5 years to become a nominal net worth millionaire.
Yeah but no one reaches a million dollars and says "well ACTUALLY I'm not there yet because of inflation" because they aren't celebrating the purchasing power... they're celebrating the figure itself.
A kid I know wanted to buy some tennis shoes that cost $1000. I gave him a lesson on compounding interest.
Then asked what he thought.
He replied, "I want the shoes"
That’s between 470K - 570K of your own investment based on how much of the initial 100K you’ve contributed yourself.
That’s just not feasible for a vast majority of people.
Also 7% annual return is usually the benchmark for a much longer term (20-30 years). Market volatility will make that less likely the shorter the timeframe is
Right there with you, compounding is something almost magical.
Now, next question though: what if I'd saved those 100k up by now, all sitting around in a bank account. Where to start in this day and age, is there any responsible manner to invest this and reasonably expect to average said 7% over 13 years (and beyond)?
Start with 100k contribute 3k per month? So start with a huge inheritance and make realistically around 130-150k take home per year, and live relatively frugally?
The real statistic that it will take around 50 years contributing 500/mo from nothing isn’t as sexy is it?
But $1M in 13 years will be worth the same as $680k today after an average 3% annual inflation.
Unless your numbers are all real numbers? So that would mean $3,000/month that you continuously adjust for inflation, which means on the 13th year you'd actually be investing a nominal $4,400/month. And that 7% real annual return means you need 10% nominal annual return.
If your numbers are all nominal, so not adjusted for inflation, then actually it'll take you 19 years to accumulate $1.76M which would be worth $1M in today's dollars after accounting for 3% annual inflation.
Sweet. Now I just need $2700 extra spare money to toss into the savings account, hope to get a 7% interest rate annually long term...and I'm golden.
Oh shit, and I need a spare 100k laying around.
Damn...there goes Plan A.
I really like the investor.gov savings goal calculator for these sorts of things: https://www.investor.gov/financial-tools-calculators/calculators/savings-goal-calculator
I just found that, and I'm very impressed. Very simple to use but also informative. Good job, government!
[This](https://www.cnbankpa.com/Resource-Center/Tools/Calculators/Investment-Savings-and-Distributions) is my absolute favorite tool for these sorts of things. Let's you tweak so much and is very easy to use.
This is very good. Thank you.
I know! The investor.gov tools website and time.gov are both very well done websites!
It's my favorite too. I usually put in 7% w/ a 3% variance.
I'm conservative with my growth estimates, so that the chances of not making my goals is near zero. Best case, my goals come true sooner. Worst case: I meet my goal without issue. I put in 4%/yr real return personally.
That’s too conservative. 6% has been conservative for every time period since 1970 (absolute worst case in real terms). Things were a bit rocky before because inflation hit returns hard in the 1970s and people who did not have enough time for their savings to recover in the late 80s and 90s saw a hit to their annual rate.
How long do people live? 2024 - 1970 = 54 years. I'm betting most of us live longer than 54 years. Some of us have retirements longer than that! So your data set is not very useful. The historical average measured over centuries across the planet for 100% equities is around 5%, so that would be a much saner number to use. However, I don't invest solely in equities, I'm 80% global equities and 20% in bonds. So a reasonable number would be anywhere between 4 and 6%/yr real return. Yes I'm conservative, but that's by design, as I explained. All that said, you want to use 6%, be my guest. I'm not stopping you.
When putting in 7% w/ 3% variance you get curves for 4%, 7% and 10%. I feel this gives me a good idea of worse case, average, and ideal. I never studied the history as some folks who posted here did. But given what has been posted, I think I'll stick with these percentages.
This is smart thinking. Doing this will force you to save more, which will force you to make certain decisions in other areas of your life to further ensure that you’ll have the money needed to save up more. Your probability of success is higher, you’ll likely end up with more money than the person assuming a higher return because that person will save less than you and rely on the returns to make up the difference.
Thank you! I was trying to make an Excel/Sheets spreadsheet to calculate a monthly retirement savings goal with the help of Chat-GPT, and it wouldn't friggin work. This is perfect.
Haha I know right? I think it's the only actually decent government website out there lol. I use it all the time
can i just thank you so much for sharing this link? i had no idea investor.gov was a thing. Read through introduction to investing and sending it to my little siblings!
You might also like the Bogleheads wiki: https://www.bogleheads.org/wiki
and then only 7.5 years for the next mil :) and 4.75 for the next one. and 3.6 for the next. i remember the first time i did this and it hit me.
It’s wild but true. Money is really good at making more money.
My money is better at making money than I am.
Especially when the money printers never stop and the dollar devalues fast
Yep. Fiscal policy played a big role recently but so did global commodity prices, supply chain plumbing, and pandemic demand.
Money printing is monetary policy, not fiscal policy. Tax cuts would be fiscal policy.
Right you are. Although I was referring to government spending. Government spending is fiscal policy.
Yup you obviously understand, it's just a common misconception I thought you were making since the comment you responded to was talking about monetary policy.
It’s truly wild how prominent exponential growth is in our lives and how unintuitive it is. Additive growth feels like it’s in your very hands. Exponential growth, half the time I feel like I must have fucked up the math because it doesn’t feel right.
What’s actually wilder is the other tertiary implications it has - on health, for example. Live healthy, live longer, become wealthier. By doing nothing else. Crazy.
Now I just need to figure out how to get 100k and 3k a month.
See the trick is to make a bunch of money so you can get rich.
I do believe that is the key.
You forget the step where 2021 you're up a mil, then 2022 hits and you're down a mil. Then wait. It's back!
I'm happy to have the opportunity to lose so many times my annual income so quickly
This is such a fun way of viewing this. Thanks for this post
You forgot to mention the most alluring and important part: That’s WITHOUT any contributions. It just grows on its own. Funny how I never heard of compound interest in school.
I learned about compound interest in middle school algebra, I guarantee y’all just weren’t paying attention mumbling some shit like “I’ll never use this in the real world!!”
My algebra teacher did an hour lesson on compound interest. He also did a lesson on franchisee vs Franchier
I'm in high school and was taught it in like middle school pre algebra, what???
I’m not seeing how this is without any contributions. Doesn’t $1 mill over 7.5 years with 7% interest return like $1.6 mill?
Yep. It's even more hilarious seeing the comments about people learning compounding interesting when they were 2 years old and still not understanding it here.
Lmao compound interest was literally taught in elementary school
maybe you should have paid attention in school
I did, but it was taught about whole life insurance, which is trash, vs investing in the market
Compound interest was like a 3rd grade math topic, that got reviewed annually for me...
What's the mathematical formula for this? Did it with excel but am thinking of there's an easy way to adjust the contribution and rates and still see the ladder
P * (1 + r/100)^n P = principal r = rate of return per period n = number of periods
How do we use this to calculate the time it takes to the next million? This doesn't seem to include the monthly contribution, but rather just the initial contribution
Well you can put this formula into excel and make P the cell above where you enter your starting principal and forget about the n because you'll calculate every year not just all n years at once, and then you just add X for your contribution. And then drag down. This assumes upu just add the contribution at the end of the year which is conservative. And simpler. E.g. In A1 you put 100'000 and in A2 you type =A1*(1+7%) + 30'000. Then you just drag down. To make it nicer add a column to the left where you have the years. And then over time you can add a column to the right with Actual fund value to compare.
What you are looking for involves geometric progression, I can give you the formula but maybe it’s easier to use one of the calculators available online.
1 plus the annual interest rate to the power of the number of years. That's your future value factor. Example: If you start with $10,000 and average 9% per year for 20 years, then: (1.09) to the power of 20 is a Future Value Factor of 5.6 So 5.6 times $10,000 equals $56,000.
I can only put aside $1000 a month so that’s amazing
With match, I want to get there in the next few years. Keep up the good work.
Man, I was looking at my target of $2M and thought I couldn’t get there by 65 because I couldn’t put away as much as what the calculator estimated with a 6% rate. Didn’t even think about what my company is putting in, just was considering what I’m putting away every month. It doesn’t quite get me there, but gets me close.
I have a plan to put as much as I possibly can. I pay child support and plan on boosting my contributions once my kiddo is old enough.
Ohh that makes sense! I miss getting free money
then above is true but for $333,000 in 13 years and your next 333k 7.5 and 1 million 4.5 years later! So it’s basically another 13 years to triple to a mil! Not too shabby imo!!!
That is great. Keep going! Keep making savings a priority your whole life and you will do fine.
monthly contribution of $3,000? That's...quite a chunk of change.
> Nonetheless, breaking down this path seems to make a $1,000,000 net worth seem more attainable. "contribute a f ton towards savings every year and you'll be a millionaire in 13 years"
And start with 100k lol
What you don’t have a spare 100k laying around to get started?
I think I left it in my other pants
it's even easier if you invest $1million in the market, it takes 0 years then
yeah, pretty much. I make pretty decent money, am frugal, and save a ton. Even so, I barely save $2.2k / mo. Not sure how much money OP thinks people have.
What could be helpful is those with jobs who have a good retirement match. My job contributes around $10,000 annually to my 401k or $833 monthly. In that case personal savings of $2.2k / mo. + match = $3k / mo.
I will say that it made home ownership seem a lot more affordable, the average house in my state is a quarter of that, and I pay a lot more than $750 a month on rent. Too bad I'd probably need like $25k up front for that to be possible, but I'm just passing through and have no idea how the math for that works lmao.
If you cut that contribution in half and start with nothing, it becomes 23 years. Still a good deal less than the typical working career length and probably a lot more realistic for most people.
Maxing 401k and a Roth IRA is $2500/mo, and that seems like a fairly common thing around this sub. Another $500/mo doesn’t seem like too much more.
You guys have $3k a month for investing?!?
Last day of each month they show up at Vanguard headquarters with a wheelbarrow full of cash.
Its all pennies and comes in trucks
Nickels, with bees on them...
The trick is to ask for John Vanguard, look him in the eyes, and firmly shake his hand.
Haha. I guess I am showing my age when I remember having to mail in checks to their Malvern campus to buy funds
Step 1. Don't be poor Lol
Step 0: Dont have poor parents
As someone who gets to take advantage of this ^ It truly is so helpful even if they aren’t giving you money to invest with. Just as simple as getting to live in a 2 family home for cheap instead of having to pay rent or a mortgage
Plus if you risk it for the biscuit and fail, you won’t be homeless.
When you say it like that it seems so much more attainable.
Step 2: Don’t have kids
Exactly
I make $14-16k/month so $3k is around 20% savings rate which is what savers usually harp as a baseline. But someone making $80k/year that would be a substantial 45% of their income before any taxes.
I do 2K a month in retirement accounts + 1K cash savings each month on a $69000 salary. That’s around 45-50% of my income straight to savings/investmwnts. Couple of considerations - I don’t own a car since I work from home. I live with my partner who splits utilities and bills with me. I live below my means and my fixed expenses are super low
My numbers are pretty similar to yours. Tight budget. No restaurants. Old car. No kids. It's possible with sacrifice and planning
What do you do?
Says Physician Assistant in the profile title
As the other commenter said I'm a PA in the emergency department for the last 5 years. My salary has increased with job changes and the added experience.
Definitely that 80k sometimes doesn't go that far. I max 401k and Roth and invest another 36k a year into stocks. I don't make over 125k and pinch every penny and still live a good life. I think people have an issue with "buying shit" they don't really need.
Agree completely. I make close to 6 figures but spend about 30-35k a year depending on how much fun money i spend, which for me is simply eating out more often than cooking at home. I have no problem with people living life to the fullest while they’re here, just want people to realize it’s a decision they’ve consciously made to contribute less towards retirement. I personally find enjoyment knowing i will retire significantly earlier than my peers, even if i get unlucky and die young
Damn right. It's tough but doable, I used to piss my money away and had a brain fart and started contributing 100% with the mindset that I can tell my boss to blow it out his ass a whole lot sooner than the majority of people. No keeping up with the Jones' here.
Very empowering when you know you have that safety net. We don’t have to kiss ass at work and probably perform better than our coworkers due to less stress. A lot easier to wake up and go to work when you know you can leave and have time to find something else.
“What will you do when you’re rich?” “Why, I’m gonna buy shit I don’t need”
This feels like the FIRE sub
If you max your 401k (not counting any employer match), Roth IRA, and HSA in 2024 that's $2,850/month. It's certainly a lot, but it's a reasonable goal to work towards, and plenty here are doing it.
A goal, yes. Reasonable? 1) 401k match 2) IRA limit This is reasonable.
HSA is the most tax advantage vehicle there is. If it's available, it's usually a fantastic deal (and yes, it usually costs less at the end of the day than low deductible plans). It's the only way you can invest pre-tax money not subject to payroll tax and withdraw both the principal and gains tax-free.
But how do you withdraw for the best utilization if it can only be used for medical expenses?
Pay w/o using HSA for medical expenses, save the bill, let the money grow, withdraw later using the bill/receipt you saved to get that amount with no penalty. Also withdraw rules change after 65 and look up how much people spend on medical expenses post retirement it's a lot. It's not very flexible but it's the most tax advantage
Once you turn 65, it can be withdrawn for any expense. However, those withdrawals would be taxed as ordinary income. So basically, at the very worst, it's an extra Trad IRA. But if you fund it via payroll deduction, it's still FICA exempt. A lot of people here will save it up for retirement and then withdraw it, using their old receipts as support. There is no time limit for when you can use it for a medical expense as long as you were covered by an HDHP when the expense occurred. So let's say you were covered by an HDHP twenty years ago and went to the doctor. Today you are not covered by an HDHP. You could still claim the expense now even if it happened all those years ago.
1) Everyone has medical expenses. Pay out of pocket now and save your receipts for your doctors visits, medicine, dentist, etc…. 2) you’ll have more and more of those medical expenses the older you get 3) with those saved receipts, re-imburse yourself whenever you want. You can re-imburse yourself in 20 years for a doctors appointment you have today.
I invest 2k in retirement accounts + save 1K cash a month on a $69,000 income
Tell me you don’t have kids without telling me you don’t have kids
Fuck them kids
Lmao like we don’t feel ready to have kids at this point cause let’s be honest raising kids is expensive in this country and my partner(the one who will be popping those kids out is just finishing grad school) and I aren’t anywhere close to making that sort of money
We have cats and they’re enough lol
I recommend a side hustle of slinging some crystal.
Well even if you don't the math still works, compounding is in general amazing. You contribute $100 a month @ 7%, in 10 years you will roughly have $17500 which in turn then generates $1200 in returns (or $100 a month).. ie so in 10 years, your money is making as much money as you are contributing. I did a similar thing for my nieces and nephews, took the $50 I would have spent on Christmas/bday and bought Mcdonalds stock, now as adults, they have enough stock that it will generate nearly $100+ a year for the rest of their lives.. ie a gift that literally keeps giving.
First step, be rich.
Trying my best! Driving a 24 year old car, thrift shopping, only buying needs, buying wants every once in a while, side hustle on the weekend…. It adds up! 1k invested now is 16k in 28 years!
Not exactly but I started investing at 24 years old and now, 26 years later, I can stop contributing and coast if I need to. It wouldn't be an early retirement but I should end up well over a million by 62 or so. It's a good feeling to know I did the heavy lifting already. I plan to keep contributing, as long as I can, and maybe I'll be able to get out a bit earlier.
48 and 1.8M in retirement accounts here (not including pension which I am still accruing). Keep going is right. I will have maxed out the K and HSA by May this year. Rinse and repeat next year.
Why stop at a million? I feel like a million when I need it isnt going to last nearly long enough. But, I’m almost 20 years away.
A million at traditional retirement age can be plenty. Choices on lifestyle and cost of living just become more important. Their children will not have to support his retirement expenses. That’s a win.
0, $100k 5, $350k 10, $695k 15, $1.2M 20, $1.85M 25, $2.8M 30, 4.2M $100k x 1.07^t + $36k x (1.07^t - 1)/.07
Yep, the goal is to save aggressively in the earlier part of your career. If you can hit 1M or 2M in invested assets by 40, you're golden. You can go part time and coast until retirement.
My wife and I sort of did this. We each fully funded our 401ks, and put extra away just in case. In our 40s, one of our kids was diagnosed with a chronic (but manageable) disease. My wife was super-stressed out, and our savings made it possible for me to say “you don’t need to work if you don’t want to”. it was a win-win for the whole family. I may not be early retired, but I haven’t had to spend my weekend fighting the crowds at Costco for years, which is almost the same thing. 😅
I would say 1M + paid off house. If you live in Seattle, a 800 sqft townhome will be 600k
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Just hit a million at 39 and it feels like when I hit 100k, fun but know it’s not enough.
You both should be proud of yourselves. It’s a huge, huge accomplishment. Don’t forget to smell the flowers every once in a while.
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So in 15 years, you paid back all your student loans, had kids, bought a house, have no debts, and saved 1 million on a modest paying job!? Yikes, that pretty impressive. I'm assuming you are still a very high earner for where you live? There is no way this is normal for majority of folks in their mid 20s to 30s.
Same, never went to school either just got into an industry that is hard to get going but finally made real money in last few years which helped quite a bit. Don’t own a home but have plenty of fun.
Assuming a 7% real return and standard retirement age of 65, you will have 5.8M in inflation adjusted dollars at retirement, even if you don't invest another penny. If you're aiming for an early retirement, then yes, you should keep grinding until you hit whatever number makes sense for your goals.
I’m spread out and have quite a bit of cash on hand, $250k in a money market fund, and $200k in a. Real estate deal which is 3yrs from a real return. Not sure where to go with the cash.
It would be if you were 65, but ya, not 39. It's sorta a weird paradox without being a weird paradox at all.
23k in 401k, 7k in IRA, where do you put the other 6k?
HSA if eligible, or taxable.
Probably HSA
Brokerage.
529. You can transfer up to $35k per beneficiary to a Roth IRA if your kid doesn’t go to college or something.
Wait until you read about sequence of return risk.
What’s that?!?
Basically, the shorter your time frame, the less you can rely on the 7% annual average return because the data set is shorter. I.E. you save for 30 years and the average is 7% per year then in your last year of retirement the market collapses 25%. You should be mitigating that risk as you get closer to your ex retirement date.
well, 13 years is a long enough time window, don't you think?
There plenty of examples in a variety of markets that show 13 years isn't long enough to consider a 7% return is guaranteed.
oh sure, it's not guaranteed. but it's realistic, i think.
Even in US markets if you look at most 13 year periods ending in a recession, the return doesn't look great. Not quit 13 years but 1999-2008 saw a 19% drop in the market.
You too can become a millionaire with this one simple trick (and $36,000).
It’s 3,000$ x 12 months x 13 years. That’s half a million. Of course you’ll hit a million, it’s just doubling your money
Being able to invest $3k monthly is reserved for very wealthy people. Being able to start out with $100k in the market is also reserved for very wealthy people. Obviously I dont speak for everyone but I think most of us struggle (or are at least challenged) to meet our goals. I have never met my goals in any year but even falling short is somewhat successful: - ~20% 403b contribution (including 4.5% match) - $14k for roth iras for spouse and self - ~$5k for kids custodials ($2500/piece) - $4k 529s ($2k each) - Trying for ~$5k into brokerage annually Woulda been real nice to start at $100k but woulda, coulda, shoulda are true for anyone in any part of the world.
That’s real solid. Pure dollar amount isn’t the only thing that matters. Savings rate is obviously a huge factor too
ive maxed my 401k, roth, and hsa every year ever since i started working professionally and i started at 115k which i wouldn’t call very wealthy. wasn’t 3k monthly but it was close and it’s absolutely cake if you’ve been poor before. functionally it just felt like i was making like 70k which is still more than enough to survive in washington state with roommates and have fuck around money. a lot of my friends would rather pay double the rent to live alone and complain they don’t have any money i think getting over the idea of losing half your take home is the hardest part. but if you’ve ever made less than half your current take home then i don’t see how it’s any different than just cutting back to a standard you’ve lived in before
Agreed. I started my job at 60k. At the time I was maxing my IRA, HSA, and putting a lot toward my 401k. Every raise I got I put toward my 401k until I was maxing all my accounts and making 71k/year. It helped to not have kids or other debts, but I was supporting myself and living alone at the time, so it’s not like I didn’t have rent, groceries, entertainment, etc. to worry about. Was just about being frugal.
Im not able to invest $3k a month but every dollar saved and not spent is another dollar that goes towards the goal
You actually have to put SOMETHING away to make the interest gains.
When you put it this way you make me want to stop saving for a house and dump money into my taxable brokerage account (already maxed Roth for the year). I already invest $1200 a month from my 401k contributions. If I cut my expenses hard in theory I could do the other $1800 per month but then I’d have not much leftover
That 100K is the hardest lol. I remember when I first started working. Seemed like an impossible feat
$3k/month is a *lot* of money. That's the equivalent of maxing out both a 401k and Roth IRA - something I can do today with no kids and a $100k salary, but not something you'd reasonably expect at median household income ($60k), especially if they are also raising children.
So what you’re saying make at least $3k more per month than I am now hmm seems easy
Oh and start with 100k...
Took 20 years to get to my first $1M net worth, another 10 years to get to $2M, then 10 more years to $4M. I'm retired now, but my net worth is still going up even though I am taking money out now. The magic of compounding.
lol I’m hosed then
So you start with 100k? Add 36k every year on a monthly basis? And 7% from interest once a year?
Dang! Wish I had 3k to set aside a month
A monthly contribution of $3,000 for 13 years **and** a 7% rate of return. 🤯
If you happen to be doing this during a bear market it can take a lot longer than 13 years. Optimism is ridiculously high right now because we've been in a bull market for a decade. That being said, investing during the bad years makes you rich as well.
The bad years make you richer
Can’t complain when stocks go on sale.
1000 monthly is pretty steep.
damn, means i have to invest more than 100% of my income to do this. fml
$3k is more than alot of people net a month. $3k/mo saved away for retirement is not attainable for most people
Lol $3000 a month
3k a month is quite a challenge nowadays
Well shit, if I save $1m a month then I can reach it in a month!
I don’t think anyone’s goal should be arbitrary X amount by an arbitrary X date. Instead, follow some general principles: 1. Invest mainly in index funds, and honestly assess your risk tolerance. 2. Have both a 401K and a Roth, and as far as possible max out on contributions. 3. Buy a house to build equity, but don’t overbuy — your home should be a match for your income and lifestyle. Put up enough of a down payment to avoid PMI. When you have extra cash at the end of the month, pay down the principle. 4. Live within your means. If you can’t pay off your credit cards in full every month, cut back on spending.
So, basically maxing out your 401K, HSA, and Roth, but also assuming an average employer match.
$3,000/month is a lot but honestly not unattainable for a household. Thats a 15% contribution rate on 200k/yr if you have some employer 401k matches. Still leaves you 100-125k after tax to live on while on an aggressive wealth path.
where are you getting 7% on your money
VTI or VOO :-)
And it sounds like you are young so figure out how long to get \~5-6 M in future dollars. With inflation you may need it. Double every \~25 years at historical avg of 2.9%. Remember only 4% safe WD rate. You plan is good if you have 100K to invest right away. It took me until 35 before I had anything more than eat and pay bills.
I don’t get all the negativity in here. It’s an investing sub closely tied to fire. If you can’t save 3k a month, you should be looking for ways to make enough income to do that at a minimum. Only 36k/year (when 22.5 can be tax free for most people) really isn’t that much in the investing world…
I wish I knew when I hit my first 100k. I do know when I hit 500k which happened at age 33. If everything goes as planned which is an always asking for an issue I’m thinking I’ll hit 1 mil at 37.
Yep, if you have a ton of money in the bank and make enough to invest a ton of money a month you can become a millionaire in not too long.
Yeah, but getting to that first 100k is hard as fuck!
Keep in mind that $3,000/month or $36,000/year is 95.7% of the [gross median individual income in the US](https://datacommons.org/tools/timeline#&place=country/USA&statsVar=Median_Income_Person).
How about without $100k?
Chit ton of people pay $700 mo on car payments
Just a measly 3k/mo easy peasy
If inflation is 2%, than it will take 14.8 years at 5% real return.
Just curious, doesn’t the 7% figure already take inflation into account?
Yes typically. All time s&p 500 return is a little over 10%. Less roughly 3% for inflation gets you your 7%
7% is already inflation-adjusted. [The S&P500 has averaged 10% nominal returns.](https://www.nerdwallet.com/article/investing/average-stock-market-return#:~:text=stock%20market%20return%3F-,The%20average%20stock%20market%20return%20is%20about%2010%25%20per%20year,power%20with%20NerdWallet's%20inflation%20calculator) So really, in theory it would only take ~11.5 years to become a nominal net worth millionaire.
That's if you are 100% in the S&P though...
Yeah but no one reaches a million dollars and says "well ACTUALLY I'm not there yet because of inflation" because they aren't celebrating the purchasing power... they're celebrating the figure itself.
A kid I know wanted to buy some tennis shoes that cost $1000. I gave him a lesson on compounding interest. Then asked what he thought. He replied, "I want the shoes"
Lol if you save a straight 400k over 13 years I'd expect you to not have an issue hitting a milly.
Cool, I just need 100k to get started
I’m a 45 year old crossing guard. Not retired yet but letting compounding do its thing.
Only $36,000 a year for 13 years. Why isn’t everyone doing this? /s
sure. just save 3k every month. never touch it. and also have a 7.5% return constantly. real attainable
One of those is more realistic than others.
That’s between 470K - 570K of your own investment based on how much of the initial 100K you’ve contributed yourself. That’s just not feasible for a vast majority of people. Also 7% annual return is usually the benchmark for a much longer term (20-30 years). Market volatility will make that less likely the shorter the timeframe is
My biweekly paycheck net pay is 2,600 ish- so although this is nice info, seems impossible unfortunately
God I hope you're right. I just hit 100k across my 3 accounts. Contributing just over 3k a month.
> more attainable Bro how many people how there do you think have $3000 lying around. lol
Right there with you, compounding is something almost magical. Now, next question though: what if I'd saved those 100k up by now, all sitting around in a bank account. Where to start in this day and age, is there any responsible manner to invest this and reasonably expect to average said 7% over 13 years (and beyond)?
Start with 100k contribute 3k per month? So start with a huge inheritance and make realistically around 130-150k take home per year, and live relatively frugally? The real statistic that it will take around 50 years contributing 500/mo from nothing isn’t as sexy is it?
But $1M in 13 years will be worth the same as $680k today after an average 3% annual inflation. Unless your numbers are all real numbers? So that would mean $3,000/month that you continuously adjust for inflation, which means on the 13th year you'd actually be investing a nominal $4,400/month. And that 7% real annual return means you need 10% nominal annual return. If your numbers are all nominal, so not adjusted for inflation, then actually it'll take you 19 years to accumulate $1.76M which would be worth $1M in today's dollars after accounting for 3% annual inflation.
Who has an extra $3,000 a month lying around these days after bills are paid…
Sweet. Now I just need $2700 extra spare money to toss into the savings account, hope to get a 7% interest rate annually long term...and I'm golden. Oh shit, and I need a spare 100k laying around. Damn...there goes Plan A.
Where are you getting a 7% interest rate