How to Turn $10,000 Into Over $1,000,000 by the Time You Retire

Becoming a millionaire is a goal for many, but actually achieving a seven-figure net worth is another game entirely. The good news is that accomplishing the feat is definitely possible with the help of a few simple behaviors over the course of your working career.

Here, we’ll review how you can turn $10,000 into $1,000,000 even before it’s time to collect your first Social Security payment.

Work the financial math

First, let’s assume you’re 25 and plan to work in a formal career until age 65, and you’ve saved up $10,000 from working side hustles throughout your teenage years. Assuming broad markets perform similarly to how they have over the past century, you expect a 10% return on all invested money. Finally, you simply use index funds in your 401(k) and other investment accounts, and you generally stay away from picking any single stocks.

If your end goal is to retire at 65 with a total investment portfolio worth $1,000,000, you’d need to invest only $73 per month to get there. If this sounds impossible, that’s understandable: This is a bit harder to grasp without a working knowledge of compound returns. But the fact remains: staying consistent with your investing behavior — regardless of what’s currently happening in the market — can lead to outsized results for your long-run net worth.

Image source: Getty Images.

How to change the outcome

If you’re thinking that it’s unrealistic to save consistently or that you don’t find working until 65 all that appealing, there are some choices when it comes to changing the math. The options include:

Increase your investment amount. If you were to be more aggressive in your savings behavior and increase your monthly investment to $250, you’d reach the million-dollar mark nearly eight years sooner. This works out to a working career length of just over 32 years, as opposed to the full 40.
Work longer. In the event you don’t mind your job so much, you could make the decision to work for an even longer 45 years but only commit to investing $11 per month. This can make a lot of sense, but it does require that you start early, never stop investing, and experience market returns that do most of the heavy lifting.
Retire with less. If you’re confident you can live on $800,000 instead of $1,000,000, you could instead invest only $41 per month over a 40-year period. Alternatively, you could invest $73 per month for 37 years rather than 40 and call it a day three years earlier.

Some important asterisks

These calculations assume that markets will average their same 10% average annual return over the next 50 years. The reality is there is no guarantee that this will happen, but it does make sense to stick with index funds for their diversification benefits. This way, if the market does perform as it has in the past, you’ll be able to take full advantage of strong equity performance when it shows up in reality.

The above calculations also assume that you’ll be able to work consistently for 40 years (or more). While we can all hope that this is the case, especially if you’re in a vocation you enjoy, there is no guarantee that this will come to pass either. The chance of experiencing some event that prevents you from working consistently for 40 years is higher than most people will readily acknowledge.

Finally, in the example above, it’s important to notice that the lion’s share of the interest earned takes place at the very end of this hypothetical individual’s career. This is the very essence of compound interest: As balances accumulate, the next period’s interest will be more than the prior period’s. As such, it’s critical to start early and invest as much as you can as soon as possible.

Take control of your money today

Rather than trying to predict what’s about to happen next, focus on the behaviors you can control. Leave enough slack in your monthly budget to make periodic, consistent index fund investments and let time do the rest of the work. To the extent that you can increase your savings rate beyond widely recommended levels, do it. Future you will be thrilled when they open up their retirement statement.

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