Want a $ 1 Million Nest Egg? Here is the monthly contribution to the pension plan that could be successful | Smart change: personal finance
But let’s focus on this possibility and how to get there. Many people start working full time in their early twenties and don’t retire until their late sixties. If you follow a similar pattern, you can take advantage of a 45-year savings window.
Meanwhile, if you invest your retirement plan heavily in stocks, there is a reasonable chance that over that long window of savings you will end up generating an average annual return of 7% in your IRA plan or 401 (k). This 7% is a little below the stock market average. Assuming a 45-year savings window and that 7% return, you could retire with just over $ 1 million.
Of course, things start to change when you narrow your savings window. Saving $ 300 per month in a stock-rich retirement plan over 35 years, not 45 years, will leave you with about $ 500,000 in savings, even if you manage to achieve an average annual return of 7% during that time.
But if you already have a ten-year career and haven’t started funding an IRA or 401 (k) yet, you can compensate by making larger contributions. Setting aside $ 600 per month in your 35-year pension plan will net you about $ 1 million if you manage to get that 7% return.
The takeaway here? It doesn’t necessarily take a ton of money on a monthly basis to wind up a retired millionaire if you invest wisely and give yourself enough years to fund your IRA or 401 (k). If you start saving later, be realistic and plan to part with more money each month. Otherwise, $ 300 per month may do just fine if you think you’ll be happy to start your old age years with $ 1 million to lean on.