How to Retire With $2.1 Million on a $50,000 Salary

Most people will probably need to save somewhere between $1 million and $2 million to retire comfortably. That sounds like a tall order, especially for those earning a modest salary. But with the right savings strategy, it's possible. Here's a look at how you can save over $2 million while making just $50,000 per year.

How to save $2.1 million in 35 years

Saving enough for retirement can be challenging, but making regular contributions from an early age can make the task much easier. At first, it may not seem like your money is growing quickly. But if you've invested wisely, your earnings will stack up over time.

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If you make $50,000 per year and stash 15%, or $625 per month, in a retirement account every year that earns a 10% average annual rate of return, you'll have close to $1.3 million after 30 years of savings. And if you save for an additional five years, you'll wind up with over $2.1 million.

Your nest egg is able to grow so quickly in these final five years because you're earning a 10% annual return on a much larger sum. In the first year, you save $7,500 and you only earn $750, bringing your total to $8,250. But the next year, you earn a 10% rate of return on your $8,250 balance, plus the additional $7,500 in contributions you make. And this continues year after year.

Realistically, you're not going to earn the same return every year, like our example above, and you'll probably lose money sometimes. It's all part of investing. But the stock market tends to do well over the long term, and if you consistently invest your money over several decades, the outcome described above isn't unreasonable.

But what if you can't save enough?

Setting aside 15% of your income isn't always an easy task, but it might not be necessary, especially for those who start saving early. If your goal was to save $2 million in 40 years, you'd only have to save about $358 per month. And if your goal was to save only $1 million on your own, you'd also be fine contributing less than the $625 per month discussed above.

If you haven't already, take some time to figure out how much you need for retirement based on your goals and life expectancy. Use a retirement calculator to figure out how much you need to save per month, and try to contribute as much as it recommends.

When that's not possible, you may have to get creative. You could try rethinking your plan, perhaps delaying retirement by a few years. This will give you additional time to save while reducing the length — and cost — of your retirement.

If that doesn't appeal to you, you can look for ways to increase your income today. Looking for a new job is always an option, as is asking for a raise. But if neither of those pan out, consider a side hustle. You can choose something that's more in line with your interests so it feels less like work. And if you stash all your earnings in a tax-deferred retirement account, like a traditional IRA, you won't have to worry about paying taxes on them this year.

Once you've got some kind of plan in place, set up regular retirement account contributions, and check in with yourself at least once per year. See if you're ahead of or behind where you expected to be, and make adjustments to your plan as needed. Keeping close tabs on your nest egg like this will make it easier to spot potential problems and give you more confidence that you're heading toward the future you want.

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