Dear Clients and Friends of Cornerstone:
Becoming a millionaire used to be a pipe dream for most of us, but there are ways to achieve this in your lifetime. It all begins with a savings plan, and you will find a link in the article for a calculator to help you estimate the amount you will need to save each month to reach your financial goals. This is a great article to share with your children and grandchildren because the calculator allows you to adjust the amount you plan to save as well as the interest rate you expect to earn, and then estimates what year you will hit millionaire status. It is a great example of the benefits of starting early along with compounding interest that will ultimately help you achieve financial freedom.
If you would like to refer back to any previous newsletters we have published, you can find them on our website. Please be sure to visit www.ccadvisors.com.
– Cornerstone Capital Advisors
If you start saving and investing early on, becoming a millionaire might not be as hard as you think.
If you’re putting away $415 a month starting in your 20s, $651 a month starting in your 30s or $1,300 starting in your 40s, and getting a 6 percent return on your investment, you’re on the right track to hit that milestone by 67.
But what if you want to speed up the process and reach seven-figure status in the next 20 years? We used CNN Money’s helpful millionaire calculator to estimate how much you’ll need to put away each month.
If you’re starting from scratch with zero savings, you need to save $2,200 a month to become a millionaire by March 2037.
Now, let’s say you already have some savings.
If you already have $10,000 saved up, you’ll need to put away $2,100 per month to become a millionaire by May 2037.
And if you already have $50,000 in savings, you need to contribute $1,800 per month to become a millionaire by June 2037.
That’s a significant amount, but it’s a lot less than you’d have to save per month in order to become a millionaire in only a decade’s time.
These differences speak to the power of compound interest, in which any interest earned accrues interest on itself, and a little money invested now can end up being more than a lot of money invested later. In short: If you want to become a millionaire, the earlier you start investing, the better.
This calculation doesn’t account for the many variables that can affect your wealth over several decades, including windfalls, emergencies and rises or dips in the market. But it can give you a good idea as to whether or not you’re saving enough to retire comfortably.
Of course, saving hundreds or thousands a month is an ambitious goal. Even $2,100 a year is more than most Americans can manage. But getting into the habit of saving any amount will be great for you in the long run, and if this inspires you to get started, the simplest way is to invest in your employer’s 401(k) plan, a tax-advantaged retirement savings account. Next, consider alternate retirement savings accounts, such as a Roth IRA, traditional IRA and/or a health savings account.