Can You Retire a Millionaire if You Don’t Start Saving Until Your 40s?

Many people dream of amassing $1 million in savings by the time their careers wrap up. And if you begin saving and investing from a young age, that’s an attainable goal.

But what if you don’t start making IRA or 401(k) plan contributions until your 40s? It’s a boat many people land in.

Often, people spend much of their 20s and 30s paying off college debt and saving for near-term goals, like buying a home. As such, retirement savings can easily fall by the wayside.

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The good news, though, is that if you don’t manage to get started with your savings efforts until your 40s, you can still pull off a millionaire retirement. You may just need to be willing to pump a decent chunk of cash into your IRA or 401(k) on a monthly basis.

It can be done

The upside of beginning to save for retirement from a young age is having more years to earn compounded returns on your savings and investments. The shorter your total savings window, the more money you’ll need to contribute out of pocket to achieve comparable results.

But still, a lot of people find that they’re unable to really focus on retirement savings until they reach their 40s. And if that’s the situation you’re in, don’t panic — especially if you’re earning a decent wage and have the opportunity to make generous contributions to your retirement plan.

Say you’re 42 and want to retire at 67, which would be your full retirement age for Social Security purposes. If you pump $1,150 a month into a 401(k), or into a combination of IRA and regular brokerage account (since IRAs max out at $6,000 a year for workers under 50), you’ll end up with a $1 million nest egg if your investments deliver an average annual 8% return. But that’s actually a bit below the stock market’s average, and over a 25-year period, it’s more than possible to score that sort of return.

Of course, a monthly contribution of $1,150 is far from negligible. And putting in that much money may require you to sacrifice in other areas, whether it’s cutting back on leisure spending, driving a so-so car instead of a nicer one, or plugging away at a side hustle.

Another option to look at is delaying retirement. It may not be a desirable one, but going back to our example, say you’re only able to start saving $750 a month at age 42. If you delay your retirement until age 72, thereby giving yourself a 30-year savings and investment window, you’ll still wind up with $1 million to your name, even with making smaller contributions. That’s because you’ll have more years for your returns to compound.

The point, either way, is that you’re not doomed to a cash-strapped retirement even if you’re starting off your 40s with $0 set aside for it. If you do your best to ramp up your savings plan contributions, you might manage to retire quite comfortably despite your slower start.

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