How to become a millionaire by the time you retire

Many retirement experts recommend saving 10 times your current salary before retirement, then plan to live on 80% of your current income in retirement. So according to this calculation, if you make $100,000 a year, you should be trying to save $1 million. But who knows how to become a millionaire at 65?

Earning that much money is no easy feat, but it’s not impossible. According to career data provider Zippia, 22 million adults in the United States are millionaires and 33% are women. And while many of these millionaires work in accounting, engineering, finance and law, others are teachers or managers.

How to become a millionaire

So how can someone save hundreds of thousands or even a million dollars? First, you just need to get started. This may require depriving yourself of small daily purchases and setting a strict budget to control unnecessary expenses. Then you can use this money to make investments.

“Smart Couples Finish Rich” author David Bach told Business Insider that the key is to start investing as soon as possible. The amount you should aim to set aside each day, month or year largely depends on your current age as well as the interest rate on your investments.

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Calculate numbers

As an example, Bach created a table with starting ages ranging from 25 to 55 assuming an annual return of 12%. According to his calculations, a 25-year-old should save $3.57 a day, or $1,304 a year, while a 40-year-old man should save $20.55 a day, or $7,500 a year.

If you want to calculate the amount on your own, Bankrate offers an interactive financial calculator to help you figure out how to become a millionaire. When you enter information such as your age, monthly savings, and assumed interest rate, it calculates when you can expect to reach millionaire status.

Make smart investments

No matter how much you can save, you’ll probably need to do more than just keep it in a piggy bank or your traditional savings account. Consider putting this money in a 401(k) plan, IRA, or other investment account.

“You have to invest that money for growth,” Bach told CNBC. “You can’t put that money in a money market or a CD, where it grows at 1% or 2%. You’ll never create wealth.”

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