Building a $1 Million Retirement Fund: find out what are the steps you can take to retire a millionaire!
Achieving a $1 million retirement fund might seem like a dream, but financial experts believe it’s possible for almost anyone who follows the right approach. The principle is simple: every time you earn money, set aside a percentage for your “financial freedom”, said Brad Klontz, a financial psychologist and certified financial planner. With this habit, it’s possible to retire as a millionaire regardless of your job.
“You might think that, ‘Well, I have to become a Silicon Valley entrepreneur to become rich’. No. You can work almost any job and retire a millionaire”, said Klontz.
@cnbcYou can work almost any job and retire a millionaire, behavioral finance expert Brad Klontz says — here’s how.♬ original sound – cnbc
Karen Wallace, a CFP and former director of investor education at Morningstar encourages letting your investments do most of the work. Starting early is the key. By saving through 401(k)s, IRAs, or taxable brokerage accounts, you can take full advantage of compound interest, which helps your investments grow over time, experts say.
This approach has proven effective for many Americans – 79% of millionaires report building their net worth on their own, according to a Northwestern Mutual survey. Only 11% inherited their wealth, and 6% gained it through windfalls like lottery winnings.
Fidelity Investments reported that there were over 544,000 Americans with 401(k) balances exceeding $1 million as of September 2024. The number of 401(k) millionaires grew by 9.5% – 47,000 people – in just one quarter, driven mainly by stock market growth.
How To Retire A Millionaire
Consistent saving can lead to $1 million, said Winnie Sun, a financial advisor. For example, a 30-year-old earning $60,000 annually, after tax, could save $1 million by age 70 simply by setting aside $500 monthly (10% of their income) and earning an average of 7% on market return, she added.
This result doesn’t even factor in potential boosts like employer 401(k) matches, bonuses, or raises. Sun also advised avoiding debt, which can significantly reduce your savings progress, and keeping lifestyle expenses in check.
Starting early matters more than saving perfectly and investing in a low-cost index fund is a good place to begin, Sun suggested. “Even waiting a year can make a dramatic difference in reaching that $1 million point. Stop and take action”, she noted.
The 4% rule suggests retirees can safely withdraw $40,000 annually from $1 million and not run out of money, especially with Social Security benefits supplementing this income. Fidelity recommends saving 10 times your annual income by age 67 for a comfortable retirement. According to Sun, households should aim to save 15-20% of their income.
For those eager to retire early or build wealth faster, higher savings rates is the way to go. People on the FIRE (Financial Independence, Retire Early) movement often adapt lifestyles to save aggressively. For example, they may live with family longer, avoid unnecessary expenses, and prioritize minimalism to accelerate their financial goals.
However, building wealth shouldn’t mean sacrificing your quality of life entirely, according to Sun. “We weren’t meant to only survive and save money. There has to be that good quality of life and that happy medium”, she noted.
Sun suggested prioritizing the things you value most, like travel or gadgets, and allocating 20% of your expenses toward them. The remaining 80% can be budgeted more conservatively. This strategy allows savers to enjoy their lives while still working toward financial security.