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How to Save $1 Million Dollars

Byline profile imageWritten by Geoff Williams
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Byline profile imageEdited by Marie White, CEPF®
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If you’re looking to put away more money for retirement, you may have a goal in mind that you’re trying to reach, such as saving $1 million. You may want to earn and save more than that, of course, but for many people, $1 million is a big milestone that can also feel out of reach. These practical steps can help make that goal a reality. 

A financial advisor can help you create a financial plan to suit your long-term goals.

How to Save $1 Million Dollars

Unfortunately, there is no secret to saving a million dollars. As you might expect, it requires discipline to put money away every month until eventually, you have a million dollars saved up. These three strategies can help, whether you earn a lot or a little.

  • Automate your savings. If you set up your paycheck so that a certain amount of money goes into a savings account every month, you’re much more likely to accumulate savings than if you make a choice every month to put away money.
  • Create a budget. If you don’t get your monthly budget under control, you’ll probably never save a million dollars. That’s because you’ll constantly need to withdraw from your savings to meet your bills.
  • Establish an emergency savings account. This is very important, and it goes hand in hand with creating a realistic budget you can stick to. If you don’t have an emergency fund for surprise expenses, you’re much more likely to raid your retirement and savings accounts.

Start Early and Think About Compound Interest

If you want to save one million dollars, time and compound interest can help you get there. An investment calculator can help you estimate how long it will take for you to reach that goal, given the addition of compound interest.

For example, if you are 35 years old and begin saving for a million dollars with $100 to start,, you must put away $675 every month, with an 8% rate of return to reach $1 million – or, more specifically, $1,007,086 – by the age of 65. 

For comparison, if you put that exact amount into a savings account over the same period but with 2% interest, you would only earn $332,772.

Time also plays an important part in saving a million dollars. If you are age 50 and want to save a million dollars with $100 to start, you can put away $675 a month at an 8% rate of return, and by the time you are 65, you will have $233,906 – still a significant amount but far short of a million.

There is no easy formula for saving one million dollars fast unless you’re making $500,000 each year. At the end of the day, the more time you have to save and the higher your interest rate, the greater your savings will be.

Investment Vehicles You May Want to Consider

On your path to saving one million dollars, there are several types of investments you may consider to grow your returns.

Stocks 

You can buy stocks directly from a company, but it is more common to open a brokerage account or work with a financial advisor. Some of the bigger firms include Robinhood, SoFi and Needs an update (2022), but there are many others to consider. Some brokerages may require a minimum investment to get started, such as $500 or $1,000, but others have no minimum requirement, such as Charles Schwab and Fidelity.

Bonds 

Bonds are very popular because they are largely considered a safe investment. However, the downside is that the returns are often less than those of stock investments. 

This is why many financial advisors suggest investing in both stocks and bonds to diversify your risk.

Mutual Funds 

When you invest in mutual funds, you invest in multiple companies. For example, the fund may invest in both stocks and bonds, adding instant portfolio diversification. A

While there are risks to investing in mutual funds, as with any investment, mutual funds are still generally considered a very low-risk investment.

How Much You Need to Save Each Month

A couple reviewing how much they need to save each month.

A common question when saving $1 million is how much to save each month. 

This depends on several variables, including when you start, how much you have already saved and the rate of return you will earn over time. Because these factors vary from person to person, there is no single dollar amount that applies to everyone.

Your time horizon plays a major role in determining how much you need to save. Someone who begins saving in their 20s or their 30s can spread contributions over several decades, thus lowering the required monthly minimum. However, starting later shortens your timeline and typically means you will have to set aside more each month to reach the same $1 million target.

Also important are your investment returns. Higher returns reduce the amount you need to contribute, while lower returns demand higher monthly savings. This is why savings held entirely in low-interest accounts usually require much larger contributions than money invested for growth over long periods.

Existing savings can change the picture, as well. If you already have money invested, that balance can reduce how much you need to contribute going forward. Even a modest starting amount can have an impact over many years.

Because these variables interact, many people use investment or savings calculators to estimate monthly targets under different assumptions. Adjusting the starting age, contribution amount or rate of return can illustrate the path to $1 million based on your individual circumstances.

Bottom Line

A couple working on their retirement budget.

Saving $1 million may feel daunting, but it is not out of reach. For example, putting away $675 every month at an 8% rate of return can help you reach that milestone in 30 years. Time and compound interest will work in your favor, so the best way to save $1 million is to find ways to increase your monthly income and investments.

Tips Retirement Investing

  • A financial advisor can help you pick retirement investments for your financial plan. If you dont’ have a financial advisor, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • SmartAsset’s free retirement calculator can help you figure out how much money you will need to pay for retirement.

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