Special Report

# How Everyone in Their 20s and 30s Can Save Up to \$1 Million

Scenario 1

You are 21 years old and did not go to or did not finish college. Many workers without college degrees earn less than \$30,000 a year at the start of their careers, but their wages can rise over time. Working 35 hours a week at \$15 per hour amounts to earnings of about \$2,100 per month or about \$25,000 a year.

At this rate, saving about \$200 a month is a serious start if you consider that you have 46 years until your official Social Security age. Saving \$200 per month for 46 years will come to more than \$400,000, but saving more as wages increase with time will help you get to the goal. To generate \$1 million after 46 years you will need to save \$494 per month.

Source: MSN Savings Calculator

Scenario 2

You are 25 years old, have a college degree, and your salary is \$35,000 a year. Thinking that you will see annual raises of 2% in the years ahead is not unrealistic. Saving \$500 per month (\$6,000 per year) is reasonable, but after 42 years at 5% the savings will only grow to \$811,000 or so.

To hit that \$1 million savings goal, you are going to have to commit to \$616 per month at a 5% annual compounding. If the markets are better than the 5% base, then \$500 per month at 5.5% turns into \$924,000. And at a rate of 6% compounded, your savings will reach \$1,055,000 after 42 years.

Source: MSN Savings Calculator

Scenario 3

Now imagine you are 28 years old and getting a slower start to saving for retirement. If you are making the same \$35,000 salary with the same 2% raise expectations, you have 39 years until retirement age. Saving \$500 per month will feel harder because you haven’t been doing it, but at 5% compounded only grows to \$684,000 after 39 years.

With a compounded rate of 5.5% on that \$500 per month the savings will be worth \$771,000 by the time you’re 67, and with compounded return of 6% the savings will grow to about \$870,000. To hit \$1 million with no prior savings and 5% compounded is going to require a monthly contribution of \$730, or about \$8,760 per year.

Source: MSN Savings Calculator