With enough time and a cooperative stock market, you might even amass $9 million.
Would you love to be a millionaire by the time you retire? Most of us would. And yes, you may be able to get there by investing just $33 per day — the equivalent of $1,000 per month, or $12,000 per year.
That’s not the perfect goal for everyone, though, because some folks just can’t swing $33 per day, and some people don’t have enough time in which to get to $1 million by investing $12,000 per year. So let’s take a closer look at how you might become a millionaire by retirement, whatever your situation.
Image source: Getty Images.
Investing $33 per day to get to a million dollars
Here’s the math for those thinking of investing $33 per day (or $12,000 per year):
|
Investing $1,000 monthly for |
Growing at 8% annually |
Growing at 10% annually |
Growing at 12% annually |
|---|---|---|---|
|
5 years |
$70,399 |
$73,261 |
$76,234 |
|
10 years |
$173,839 |
$191,249 |
$210,585 |
|
15 years |
$325,825 |
$381,270 |
$447,357 |
|
20 years |
$549,144 |
$687,300 |
$864,629 |
|
25 years |
$877,271 |
$1,180,165 |
$1,600,006 |
|
30 years |
$1,359,399 |
$1,973,928 |
$2,895,992 |
|
35 years |
$2,067,802 |
$3,252,292 |
$5,179,962 |
|
40 years |
$3,108,678 |
$5,311,111 |
$9,205,097 |
Data source: Calculations by author, using Investor.gov.
I included several different growth rates because no one knows just how quickly (or slowly) various individual stocks and the overall stock market will grow over the coming years. The stock market has averaged annual returns of close to 10% over many decades. But over your investing period, it could well average more — or less.
If you can regularly plunk $12,000 into your portfolio over a long period, you’ll be dollar-cost averaging, which can be a powerful way to build wealth over time.
Other ways to reach a million dollars
What if you don’t have that $33 per day, or 30 years in which to amass a million dollars? Well, the table above should give you some ideas. If you’re able to sock away more money every year, you can reach your goal sooner. Remember: Your earliest invested dollars are your most powerful, since they have the most time in which to grow for you.
If you can only invest smaller sums, you might still get to $1 million if you have enough time. If you don’t have that kind of money or that kind of time, take heart — odds are, you can still improve your financial health by saving more aggressively now and investing effectively.
The table below might be helpful. It details how much you need to save to retire with a million dollars — if you want to retire at 65, and your money grows at 8% annually:
|
Starting age |
Monthly savings needed |
Daily savings needed |
|---|---|---|
|
25 |
$325 |
$11 |
|
30 |
$485 |
$16 |
|
35 |
$740 |
$24 |
|
40 |
$1,140 |
$37 |
|
45 |
$1,825 |
$60 |
|
50 |
$3,070 |
$101 |
|
55 |
$5,760 |
$189 |
Data source: Calculations by author.
How can you invest your money effectively?
All this saving and investing won’t work too well if you put all your money on a high-flying growth stock that crashes and burns — or if you use it to buy lottery tickets. So aim to play it relatively safe, by investing in the overall stock market for a long time.
The simplest and most effective way to do so is via a low-fee broad-market index fund, such as one that tracks the S&P 500. A great example is the Vanguard S&P 500 ETF. Also excellent is the broader Vanguard Total Stock Market ETF, which parks you in almost all of the U.S. stock market, including smaller companies.
If you’re willing to take on some more risk, especially if you have many investing years ahead of you, you might put some of your money in one or more exchange-traded funds (ETFs) focused on growth stocks.
Note, too, that it will help if you take on some habits of millionaires. These include saving and investing with great diligence, grabbing any free money available, and sticking to a plan.