How Much You Need to Save to Retire With $5 Million

The path to a $5 million retirement fund varies dramatically depending on your current age, income, investment strategy, and retirement timeline. While this goal may seem ambitious, breaking it down into manageable monthly or annual contributions makes it more approachable. Whether you’re just starting your career or looking to accelerate your savings in your peak earning years, reaching this milestone is possible with the right approach. The key lies in understanding how different factors — from market returns to inflation — will impact your journey toward financial independence.

A financial advisor can help you craft a retirement savings plan for your specific needs.  

How to Save for a $5 Million Retirement Plan

The first step to save for a $5 million retirement nest egg is to set clear financial goals and establish a budget to allocate a portion of your income towards that retirement savings regularly. You can do this by estimating how much you need to save monthly throughout different stages of your lifetime.

Using SmartAsset’s retirement calculator, we assumed that you start with a single dollar of savings and expect to earn an average of 5% compounded annually. The table below estimates how much you’ll have to save roughly each month starting at age 25 to reach that $5 million retirement goal.

Key Factors in Saving $5 Million

Starting age is a major consideration. Waiting 10 years from age 25 to age 35 nearly doubles the monthly amount you’ll have to put away. That’s due to the power of compounding interest over a decade. The longer the period, the more impact compounding has. Wait 30 years until age 55, and you’ll need to put away nearly nine times as much to hit your $5 million goal.

It may not be realistic, however, to save nearly $2,000 a month when you are just starting. Alternatively, you could plan to save a percentage of your earnings every month. As your career progresses and your income rises, so will the amount you save. Many advisors recommend saving between 10% and 15% of your salary. For this plan to work, you’ll have to maximize your earnings.

Age at retirement also matters a lot. If you start saving at 25 and plan to retire at 67 instead of 70, for example, you have to save $2,288 instead of $1,910. If you want to quit working at 62, increase your savings to $3,130 a month.

Investment return is another key variable that is hard to predict. Investment return forecasts range from a reliable zero percent if you keep your money under the mattress to a historical average of nearly 10% if you invest in the S&P 500 stocks.

A 5% annual average return like the one used in the example above is on the low side of what is considered a good return on investment. If you use an estimate on the high end, you can save less. For example, with a 7% average return, the hypothetical 25-year-old would only have to save $1,130 every month instead of $1,910.

Taxes represent another significant factor. Individual retirement accounts (IRAs) and similar tax-deferred retirement savings accounts let you deduct contributions from current income and also grow investments tax-free. However, in most of these scenarios, you will have to put away much more than the caps on contributions to most retirement accounts to accumulate $5 million. As a result, much of your investment earnings likely will be taxed. This will reduce the effective return, a phenomenon called tax drag.

Tax rates, like salaries and investment returns, can’t be predicted with accuracy. A 2024 IRS report on tax returns shows that the average rate, computed by dividing total income tax by adjusted gross income, came to 14.9%. The average masks a wide variation. Federal tax brackets start at 10% and go up to 37%. Even at the indicated average tax rate, however, tax drag slows the accumulation of $5 million.

Employer matching represents another wild card. Some companies match employee contributions to retirement savings plans up to a specified amount. Employer matches, when available and used to full advantage, can help speed the growth of a savings account.

Why Save $5 Million?

Before you plan to devote a large percentage of your earnings to retirement savings over your entire working life, you may ask whether it will be worth it. A $5-million nest egg will fund a comfortable lifestyle by most standards. Using a 4% withdrawal rate, you could have $200,000 to spend annually and be reasonably sure that you would not run out of money during a 30-year retirement. If invested in risk-free U.S. government securities, $5 million could generate $100,000 in income for the foreseeable future. If you can live on that, you would never have to spend any of the principal.

While the general attitude toward retirement savings is that more is better, some research suggests there is such a thing as enough, or more than enough. A 2023 update of a 2018 study of more than 1,500 retirees by investment firm BlackRock and the Employee Benefit Research Institute (EBRI) found most appeared to have saved more than necessary.

Across all income groups, after nearly 20 years of retirement, most retirees surveyed still had 80% of their pre-retirement savings. A third weren’t spending down their savings at all and, due to investment earnings, had accumulated more after they stopped working. With this in mind, it may be worthwhile to ask whether saving $5 million is a goal you want to pursue.

How to Save More for Retirement

Planning for retirement requires strategy and discipline. These practical tips can help you boost your retirement savings and secure your financial future.

• Start early and be consistent: Time is your greatest ally when saving for retirement. The power of compound interest means that even small contributions can grow significantly over decades. Setting up automatic transfers to your retirement accounts ensures you’re consistently building your nest egg.

• Maximize employer matches: If your company offers a 401(k) match, contribute at least enough to get the full match. This is essentially free money that can dramatically increase your retirement savings. For example, a 50% match on your first 6% of contributions instantly gives you a 50% return on that portion of your investment.

• Increase contributions with raises: When you receive a salary increase, boost your retirement contributions before lifestyle inflation sets in. Allocating just half of each raise to your retirement accounts can significantly impact your long-term savings without feeling like a sacrifice in your current budget.

• Diversify your retirement accounts: Consider using a mix of pre-tax accounts (traditional 401(k) or IRA) and post-tax accounts (Roth IRA or 401(k)) to create tax flexibility in retirement. This strategy allows you to manage tax implications based on your future income needs and tax rates.

• Regularly review and adjust your strategy: As you age, your risk tolerance and timeline change. Schedule annual reviews of your retirement portfolio to ensure your asset allocation remains appropriate for your goals and time horizon.

Implementing these tips for saving more for retirement can help you build a more secure financial future. Remember that small changes today can lead to significant differences in your retirement lifestyle tomorrow. Talking to a financial advisor can help you align your investment strategy with your goals.

Bottom Line

Saving $5 million by retirement is possible if you start early, save a lot, invest well and have some good luck. Many variables must be considered, including when you start, how much you can save, the return your investments earn, when you plan to retire and how well you manage taxes. No matter how you approach it, a plan like this requires discipline and commitment.

Tips for Retirement Planning

• Long-term plans like saving for retirement can benefit from the insight of a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel 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 Social Security calculator can help you estimate how much your government retirement benefits will be once you claim them.

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