5.02.2013

That easy to Save One Million Dollars?



How to Save One Million Dollars

Excerpt:

The elusive million dollar milestone...is it reachable? Well, in short, yes. But not without some careful planning and discipline. Time is a key factor, of course. It all depends on your age, when you plan to retire, what kinds of accounts you use, your investment costs, and your risk tolerance. The more you are able to save on a regular basis, the less risk you need to take and the less time it should take to hit that first million.

If you are 35 and starting from scratch, for example, you need to save around $735 per month to have $1 million by age 65, assuming an 8% average annual return. If you are 40, you need to save around $1,135 per month. If you were willing to take on more risk with your investments and managed to average a 10% annual return, you would only have to save around $506 per month from age 35, or around $850 each month from age 40. If you were more conservative, you would need to save more. You get the idea. 
Comment: I plugged into Excel and got $ 631. Here's the function (use Excel's function builder which is very easy. I multiplied by -1 to make the result a positive number.



Comments:
  • Does one really need $ 1,000,000 to retire? Well if one invests in dividend paying stocks that $ 1,000,000 would be 20,000 shares of say General Mills which pays a dividend yield of 3.1% for an annual income of $ 31,000. So one's retirement would be whatever one has from Social Security. The average social security check is $ 1,230 per month or $ 14,760 per year. So the question is ... can you live on $ 46,000 per year? (I think I could)
  • But is the 8% return reasonable. I have doubts.

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