3 steps to saving a million dollars you may want to consider
Wouldn’t you love to have a million dollars? Wouldn’t that make your life much easier?
If you agree but can’t imagine you’ll ever open your savings account and see a million dollars* sitting there, we have good news–it may be easier than you think.
One way to do this is to figure out how much you need to set aside a month and then create a savings plan to make this happen.
After some math and applying averages based on predictions around future returns, you’ll see that reaching a million dollars is an actual possibility.
Here are the three steps you may want to consider:
Make a plan
If you’re like most people, you’d love to be a millionaire right away. Consider a more reasonable plan.
An IRA allows you to contribute money toward your retirement in a tax-advantaged way.
With a traditional IRA, you pay taxes when you take the money out when you’re ready to retire. With a Roth IRA, you contribute using your post-tax dollars so when you are ready to retire, the money is yours.
Using an investment calculator, you can see how much money you’ll need to put aside into an IRA in order to get to that magic number on time.
Figure out how much you expect your investments to earn
When it comes to the stock market, there’s no such thing as a crystal ball.
Some years the market does better than others. For example, the market has been soaring over the past 10 years following the Great Recession. But before and during that time, there were periods when markets fell or just underperformed.
That said, many experts predict that the long-term expected annual return for US large cap stocks (i.e., the S&P 500) is 5.9%.
If you use an investment calculator, you can try and plan out your savings strategy over time, using that 5.9%** as a benchmark. And while the markets may go up and down over time, staying invested for the long haul (we’re talking decades, not days), can help you weather storms in the market.
Come up with your millionaire monthly savings number
Finally, let’s figure out the amount you may need to set aside every month from here until your goal date of becoming a millionaire.
For a lot of us, putting that much money aside each month is a tall order. It’s better to start earlier to get a head start. When it comes to saving and investing, time is your best friend.
There are other ways to get to your goal.
If you have a employer-sponsored retirement plan, be sure to take advantage of matching. As long as your employer matches some amount of your contribution, you’ll have a much easier time reaching your goal.
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