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- Last Updated: Tuesday, 03 November 2020

To many of us, the ultimate measure of a successful career was to retire a millionaire. But it takes more than just dreaming, and a big salary, to retire with that much money. It takes discipline and time.

In this article, we're going to discuss how to save enough money to retire a millionaire. We'll also run through some statistics on personal wealth, so you can get a feel for how many Americans are in that elite club. Finally, we're going to help figure out if a million dollars is enough money to supply your financial needs in retirement.

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The most recent statistics on the number of millionaires in the United States was published by the Census Bureau in 2017. Remarkably, the median household net worth, which is the total of all assets minus liabilities, was only $104,000. The medium value is the half-way point in the data, meaning half of all households had less than $104,000, and half had more than this value.

Assets included in this calculation include homes, along with many types of investments including retirement accounts such as 401(k) plans, which had a median value of only $65,000 per household in 2017. Liabilities included both secured debt such as a mortgage, as well as unsecured debt such as credit card balances.

IRS publications on personal wealth indicate there were 3.5 million adults with a net worth of $1 million or more. This is less than 2 percent of the U.S. population.

There are really only four variables someone needs to understand when calculating how much money they need to save each year to retire a millionaire:

- Their current age.
- Their desired retirement age.
- The return they think they'll get on their investment.
- The money saved to date that counts towards this goal.

Everything else being equal, the earlier someone starts saving, the easier it is to hit that million dollar mark. That's because compounding interest is on their side. Let's see how that works using a couple of examples.

Let's say Nick is 30 years old and he is thinking about retiring at age 65. Let's also assume that he has $50,000 saved toward that retirement goal of $1 million. Furthermore, let's assume that his investments will earn a 7.0% annual return. To reach his goal, he only needs to save $3,372 per year. A 50 year-old will have to save over 10 times that amount: $34,305 per year.

Now some readers might be thinking that a 30 year old might not have $50,000 saved to start with, unlike the 50 year old that might have that kind of savings. Well, even if the 30 year-old only had $10,000 in the bank, they'd still only need to put away $6,462 each year to reach their goal.

The calculations performed in the above example were all completed using our retirement calculators. Our millionaire calculator will help users to figure out exactly how much they need to save each year to reach this goal. But it doesn't help answer the question: Will a million dollars be enough in retirement to meet all of someone's income needs?

The concept of the time value of money tells us that a million dollars today might not have the same buying-power in the future. In fact, for that 30 year-old in our prior example, the impact of inflation could mean this might not be enough money to supply their needs in retirement.

There are many retirement income rules of thumb. Personal finance articles often state individuals need to have enough money to replace 70% to 80% of their pre-retirement income. For most individuals, this simple rule of thumb works pretty well. A more accurate method involves actually calculating all of their post-retirement living expenses.

We have an entire article dedicated to the topic of calculating retirement income needs. We also have a large selection of retirement calculators to help users work through some example scenarios including:

- Retirement Income Calculator: figures out if the user's retirement income expectations are realistic based on their current retirement funds and savings rate.
- Retirement Withdrawal Calculator: helps users figure out how much money they can withdraw from their retirement fund each month. Using retirement age and funds at retirement, the calculator allows users to estimate a monthly income stream they can receive from this money.
- Retirement Savings Calculator: this last calculator helps users to figure out how much money they should save each year to reach their retirement income goals.

Saving enough money for retirement takes both thought and time. Remember, it's not how much money someone makes; it's how much they save.

All of the above calculators can help figure out if a savings plan is working by taking a slightly different approach to estimating how much money is needed. Anyone that's thinking that joining the millionaire's club is the answer to all their retirement needs; it's time to start figuring out if that's true.

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