$1,000,000 has been the long-held goal for many people. Is it as hard to reach as most people think? Let’s dig into the numbers!
First, let's make a few assumptions. Under these scenarios, the investor will be making monthly contributions into an investment account. These funds will be invested strictly into the S&P 500. Since 1928, the S&P 500 has annualized 9.6% including dividends. For this scenario, the investor will get a 9% annualized rate of return. After all the calculations, the table below shows how much you need to invest per month to reach $1,000,000 at age 65.
For a 20-year-old, it only takes $135 a month to reach millionaire status! But as you can see, the longer you wait to start investing, the more it takes per month to reach millionaire status. Some might say $1,000,000 won’t be enough to retire 30 years from now. They might be right, but let's look at the numbers for $2,000,000.
If you start investing right away after starting your first job, you could reach $2,000,000 in investments for less than $500 a month. Starting early is key to taking advantage of compound interest.