Retiring a Millionaire

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To many of us, the ultimate measure of a successful career was to retire a millionaire. But it takes more than just dreaming, and a big salary, to retire with a million dollars. It takes discipline and time.

In this article, we're going to discuss how to save enough money to retire a millionaire. We'll also run through some statistics on personal wealth, so you can get a feel for how many Americans are in that millionaire's club. Finally, we're going to help you figure out if a million dollars is enough money to supply all your financial needs when you reach retirement age.

Millionaire Statistics

Additional Resources

The most recent statistics on the number of millionaires in the United States was published by the Census Bureau in 2009. Remarkably the median household net worth, which is the total of all assets minus liabilities, was only $120,300. Remember, the medium value is the half-way point in the data - meaning half of all households had less than $120,300, and half had more than this value.

Assets included in this calculation include homes, along with many types of investments including retirement accounts such as 401k plans, which had a median value of only $41,000 per household. Liabilities included both secured debt such as a mortgage, as well as unsecured debt such as credit card debt.

IRS publications on personal wealth indicate there were 3.5 million adults with a net worth of $1 million or more. This is less than 2 percent of the U.S. population. This means the millionaire's club is pretty exclusive.

How to Retire a Millionaire

There are really only four variables that you need to understand to calculate how much money you need to save each year to retire a millionaire:

Your current age.
The age that you will be when you retire.
The return you think you'll get on your investment.
The money you have saved to date that counts towards your million dollar goal.

Everything else being equal, the earlier you start saving, the easier it is to hit that million dollar mark. That's because you have compounding interest on your side. Let's see how that works using a couple of examples.

Example Calculations

Let's say you're 30 years old and you're thinking about retiring at age 65. Let's also assume that you have $50,000 saved toward that retirement goal of $1 million. Furthermore, let's assume that your investments will earn a 7% annual return. To reach your goal, you only need to save $3,372 per year. A 50 year-old will have to save over 10 times that amount - $34,305 per year - to save a million dollars.

Now some of you might be thinking that a 30 year old might not have $50,000 saved to start with, unlike the 50 year old that might have that kind of savings. Well, even if the 30 year-old only had $10,000 in the bank, they'd still only need to put away $6,462 each year to reach their goal.

Millionaire Calculator

The calculations performed in the above example were all completed using our retirement calculators. Our millionaire calculator will help you to figure out exactly how much you need to save each year to reach this goal. But it doesn't help answer the question: Will a million dollars be enough in retirement to meet all your income needs?

Money Needed in Retirement

If you've ever studied the concept of the time value of money, then you'd also realize that a million dollars today might not have the same buying-power as a million dollars in the future. In fact, for that 30 year-old in our prior example, inflation means a million dollars might not be enough money to supply all their needs in retirement.

There are many retirement income rules of thumb. You'll read personal finance articles stating that you'll want to have enough money to replace 70% to 80% of your pre-retirement income. For most individuals, this simple rule of thumb works pretty well. A more accurate method involves actually calculating all of your post-retirement living expenses.

We have an entire article dedicated to the topic of calculating retirement income needs. We also have a large selection of retirement calculators to help you work through some example scenarios including:

Retirement Income Calculator - this calculator helps you to figure out if your retirement income expectations are realistic based on your current retirement funds and savings rate.
Retirement Withdrawal Calculator - this calculator can help you figure out how much money you can withdraw from your retirement fund each month. Using your retirement age and funds at retirement, the calculator allows you to estimate a monthly income stream that you can receive from this money.
Retirement Savings Calculator - here is one last calculator that can help you figure out how much money you should save each year to reach your retirement income goals.

Saving enough money for retirement takes both thought and time. Remember, it's not how much money you make; it's how much you save.

All of the above calculators can help you figure out if your savings plan is working by taking a slightly different approach to estimating how much money you'll need. If you're thinking that joining the millionaire's club is the answer to all your retirement needs, then it's time to start figuring out if that's true.

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