Want to Retire at Age 60 With $1 Million? Here's the Monthly Savings It Might Take
Image source: Getty Images
Early retirement can mean different things to different people. For one person, it might mean stopping to work at age 55. For someone else, it could mean calling it quits at 48.Age 60 doesn't constitute a super-young retirement, but it's on the younger side. And it's kind of hard to retire before age 60 due to the sheer fact that you generally can't tap your IRA or 401(k) without penalty prior to age 59 1/2 anyway. Read more: unlock best-in-class perks with one of these brokerage accounts
Now, to pull off a retirement at age 60, you may want to make sure you have $1 million saved. The reason? If you exit the workforce at that age, you may be looking at another 20 years, 30 years, or more of paying bills. So you need a decent chunk of cash to avoid financial worries.The good news is that it's more than possible to retire at 60 with $1 million -- even if you don't start saving and investing money the second you start earning a paycheck.A surprisingly simple path to $1 millionYou'll often hear that retiring with a lot of money requires you to start saving at a very young age. That's a good thing to do, but you're not necessarily doomed if you didn't start funding an IRA the minute you began working full-time. And let's be real -- it's tough to do that in your 20s when you've got bills to pay on an entry-level salary and possibly leftover debt from college. But let's say you first start saving for retirement at age 30. Believe it or not, you can still get to $1 million by age 60 pretty easily. All it takes is a $507 monthly contribution to a retirement plan like an IRA or 401(k). But there's another important piece of the puzzle -- choosing the right assets for your investment portfolio. Over the past 50 years, the stock market, as measured by the performance of the S&P 500 index, has delivered an average annual return of 10%. That return accounts for years of great performance, mediocre performance, and poor performance. To end up with $1 million after 30 years of making $507 monthly contributions to a retirement plan, your portfolio needs to deliver that same 10% return during your savings window. But if you go heavy on stocks, there's a reasonable chance of scoring that return -- and getting to leave the workforce at age 60 with a cool $1 million to your name.Of course, you're probably aware that investing in stocks carries some risk. But remember, the 10% return above accounts for plenty of market downturns. If you give yourself a pretty long savings window, you have time to ride out market declines and come out ahead -- and in this context, a 30-year window fits that bill.How to invest in stocks when you're not sure howWe've covered the numbers -- $507 a month over 30 years could bring you to $1 million if you assemble a portfolio that delivers a 10% yearly return. But what if you don't know much about picking stocks? How are you going to pull off a return that high?Actually, that's not so hard, either. See, instead of putting your money into individual stocks, what you can do instead is invest in the stock market on a whole by buying shares of an S&P 500 ETF, or exchange-traded fund. This gives you exposure to the 500 largest publicly traded companies. Remember earlier how we said that the stock market's average return over the past 50 years is 10% annually as measured by the S&P 500 index? Well, investing in that index specifically is a great route to take if you're not comfortable with the idea of hand-picking individual stocks for your portfolio but want the strong returns the broad market has historically produced. If you're able to research stocks individually, you might manage to score a higher return than what the broad stock market produces. But if you're happy with 10%, then go for an S&P 500 ETF -- especially if you find that easier. So there you have it. You may not be able to retire with $1 million at age 42 or 53 if you only save somewhere in the ballpark of $500 a month starting at age 30. But a retirement at age 60 with $1 million to your name is more than doable even if you don't start funding your IRA or 401(k) the second you start working.Alert: highest cash back card we've seen now has 0% intro APR until 2025
This credit card is not just good – it's so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes. We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
Welcome to Billionaire Club Co LLC, your gateway to a brand-new social media experience! Sign up today and dive into over 10,000 fresh daily articles and videos curated just for your enjoyment. Enjoy the ad free experience, unlimited content interactions, and get that coveted blue check verification—all for just $1 a month!
Account Frozen
Your account is frozen. You can still view content but cannot interact with it.
Please go to your settings to update your account status.
Open Profile Settings