Not a Millionaire Yet?

ByTroy Davis

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Want to be a millionaire? Spending less money than you earn and investing the difference is the cornerstone for building a solid retirement plan.  We’d all love a shot at that $1 million target, and while it might seem like an almost mythical sum of money, in reality, amassing that million is more doable than you’d think.

In fact, you may be surprised to learn that millionaires make up roughly 4% of the total U.S. population. And while some inherit their fortunes or are extremely high earners during their careers, for most people, attaining millionaire status is more a matter of working hard, saving well, and making smart investment choices. If you’re looking to become a millionaire in time for retirement and you’re willing to live below your means and consistently save a good chunk of your salary, you’ll see that this goal is perfectly realistic after all.

What will $1 million afford you in retirement?

A million dollars might seem like enough money to live the good life as a senior. But in the grand scheme of retirement, it’s actually not all that much.  Distribution rates should be more customized to fit the individual, but for the sake of discussion, we will use the 4% rule.

Seniors are living longer these days, which means you could be facing a 25- or 30-year retirement. If we stay optimistic and go with the latter, based on the 4% rule for retirement distributions, $1 million will give you $40,000 a year in retirement income. Now, think about the salary you’re earning today. If we add in Social Security income, which, for the typical beneficiary today, is about $27,000 a year for a retired couple, saving that $1 million for retirement will give you an annual income of close to $67,000 over a 30-year period. Now that’s an even more compelling reason to work toward that goal.

How to save $1 million

Saving $1 million might seem like an impossible feat, but the thing to remember is that when you start early, you get to take advantage of compounding on a long-term basis. Compounding is the concept of earning interest on interest, and it’s what allows you to turn a series of relatively small contributions into a much larger sum over time.

Say you’re earning $50,000 a year at age 30, and you’re able to save 10% of your salary ($5,000) each year until you retire at age 67. Even if your salary never increases, if your investments generate an average yearly 8% return, which is just below the stock market’s average, you’ll be a millionaire after 37 years.

Along these lines, say you get your hands on $50,000 as a lump sum of money (a generous amount, but far from $1 million). You could spend that cash on a nice vacation, summer home, or that sports car you’ve been eyeing, but if you save it instead, and it generates an average annual 8% return, you’ll be a millionaire in 40 years’ time.

Make Savings a Priority and Start Now!

Becoming a millionaire often boils down to getting your priorities straight. We just saw that saving 10% of a $50,000 salary will eventually yield a $1 million result, but giving up $5,000 a year of income at that earnings level isn’t easy. That said, if you’re willing to forgo certain luxuries along the way to make room for savings, you’ll be much happier for it as a senior.

Start saving today.  Times are hard and most people have trouble making ends meet, but imagine paying your bills if you had no salary?  There is coming a day when you either will not want to work or you will not be able to work.  If you are not saving, try to start saving 1-3% of your salary, you’ll be surprised how you won’t miss it after you start.  Already saving, try to get your retirement savings up to 15% of your total salary.

How Do I Make Smart Investment Decisions?

Do you know whether you should be saving in an IRA, 401k, or taxable brokerage account?  Need help picking investments that match your specific time frame and risk?  Need help rebalancing your portfolio to your target asset allocation, maximizing your annual return, and avoiding investment pitfalls? Need a financial plan that helps you monitor your retirement along the way? That’s where Davis Capital Management can help.  Our team of advisors will meet with you to set up your plan and get you headed for that retirement you work so hard for. To learn more, visit our website at,



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