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How to Save a Million Dollars in 30 Years

how to save a million dollars in 30 years

Many people have the goal of saving a million dollars before they retire. They want to be able to enjoy their retirement without having to worry about money. The truth is, even with a million dollars, you’ll probably still need to budget to make it last. However, every retirement savings plan has to start somewhere and this is a good round number to begin. Below we’ll cover the things you need to consider if you’re looking to achieve this goal. You can also work with a financial advisor who can map out your path to a full retirement planning strategy. 

4 Elements to Saving a Million Dollars in 30 Years

There are four components you need to consider to make it to a million: income, expenses, savings and the rate of your return on investment. Each of these pieces is a crucial part of being able to save a million dollars in 30 years and it’s important to understand the role of all factors. Taking care of all four will help you achieve your goal.

1. Income

While it may be rudimentary, the more money you make the more money you can save. If you’re making $50,000, the amount of money you’ll need to save is a significantly higher percentage of your income than if you’re making $100,000. As you progress in your career, your raise in income can help you get to a million faster if you choose to save more.

2. Expenses

Expenses are what eat away at your income, preventing it from becoming savings. These can be necessary expenses, such as food and housing or they can be extras like vacations and eating out. Cutting your expenses has a direct impact on the amount you can save. Learn the difference between your fixed and variable expenses and look for opportunities to cut back. Here are a few ways you can cut back:

  • Meal prep to eliminate food waste and money spent on takeout
  • Consider moving somewhere with a lower cost of living
  • Downsize your phone, internet and streaming plans

3. How Much You Save

If you want to reach a million in 30 years, you should start saving now. A good rule of thumb is to save at least 10% – 15% of your income. Depending on your income and expenses, this could be doable or it could be difficult. Do your research and learn what percentage of your income should be saved.

4. Rate of Return on Investment

What gets you to a million dollars in 30 years isn’t going to be your savings. It’s the compounding return on them. If you save in a regular bank savings account, the amount of interest you’ll get will be paltry. On the other hand, if you put your money in index funds that match the stock market’s growth, you could see greater returns.

The stock market averages a growth rate of 10% every year. If you save $6,000 in a year and see that 10% return, that turns into $6,600. With a continued average return of 10%, that money will grow. If we extrapolate that over 30 years using our investment calculator, your $6,000 will turn into $119,024. That’s without any additional investment.

How Much Do You Need to Save Per Month to Save a Million Dollars?

how to save a million dollars in 30 years

Now we get to the meat of it. If you want to reach a million dollars in 30 years, you should probably start saving and planning now. While the stock market may experience an average growth of 10%, that’s not guaranteed. It’s smarter to plan for a more conservative return and anything you get above that will help you in retirement.

Let’s work out an example using our aforementioned investment calculator. Let’s say you’re 30 and want to retire in 30 years with a million in savings.  We’ll also say you’re starting at $2,000 and estimate a  7% annual return rate over 30 years. To save a million dollars in 30 years, you’ll need to deposit around $850 a month. If you make $50k a year, that’s roughly 20% of your pre-tax income.

If you can’t afford that now then you may want to dissect your expenses to see where you can cut, but if that doesn’t work then saving something is better than nothing. While it’s best to save as much as you can at the start to take advantage of compounding returns, wage growth takes time.

Where Can You Save Your Money?

It’s good practice to save your money in more than one place in order to diversify any potential risk. Certain investments and accounts have less risk than others. Some come with greater rewards. Keep these three places in mind when you’re saving:

  • High-yield savings account: A high-yield savings account can give you a 3.5% – 4.0% interest rate, which is up to 15 times the national average. Having cash in savings gives you access to it if you need it.
  • Retirement account: Whether you have a 401(k), a 403(b) or an IRA, you should put a significant chunk of your savings away. The beauty of these accounts is that, in most cases, you can’t withdraw before 55 without a penalty. That way, the money is dedicated to your retirement.
  • A diverse portfolio: Along with your savings and retirement accounts, you should have a brokerage account where you can invest in stock, funds, commodities and bonds. Use the SmartAsset Asset Allocation Calculator to determine your risk profile.

The Bottom Line

how to save a million dollars in 30 years

If you want to know how to save a million dollars in 3o years, the first step is to get started. Save all that you can, but know that saving money is just a small part. To get to a million, you’re going to have to invest the money to take advantage of compounding interest. The next piece is consistency. You know your goal, now you have to save the money to get there.

Tips for Investing

  • If you have more money or assets to manage, or prefer human interaction, consider working with a financial advisor. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you’re just starting to invest and aren’t ready for additional help yet, you might want to consider a robo-advisor. Robo-advisors offer lower fees and account minimums than traditional financial advisors and are a good way for you to get started.

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