Under 30? Here’s Your 4 Step Plan to a $1 Million 401(k) by 60 | Smart Change: Personal Finance | #retirement | #elderly | #seniors
If you hope to become a 401(k) millionaire by the age of 60, you’ll likely want to begin putting money into your account at least by age 30, or sooner if possible. While it’s possible to amass a million-dollar nest egg if you start later, it’ll require much larger annual investments.
2. Invest at least $8,820 annually including your employer match
If you start investing by age 30, you should be able to amass around $1 million in savings by age 65 if you contribute at least $8,820 to your 401(k) every year (assuming an 8% average rate of return). That’s around $735 per month.
At first glance, that may seem like a lot. But it’s important to remember a few things.
First, most companies offer an employer match, so your company may give you part of that money. Say, for example, that your business matches 100% of your contributions up to 3% of your salary. The exact amount of your match would vary based on your earnings. If you made around $40,000 per year, your company would give you up to $1,200 in free money for retirement. That means you’d only have to contribute $7,620 out of your own pocket.
And this contribution is made with pre-tax dollars, so it doesn’t reduce your taxable income as much. If you’re in the 12% tax bracket, a $7,620 contribution would save you around $914 in taxes, so it would only reduce your take-home pay by around $6,706.