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Ask anyone if they want to be a millionaire and most will say yes. However many people think that getting that cool million dollars is difficult. That it’s akin to winning the lottery or running for President. It’s a nice goal, but it’s next to impossible.
But that’s not really the case. In fact, many financial books and financial articles have stated that if you invest as little as $4,500 per year over 45 years, you’ll have over $1 million by the time you’re ready to retire. On top of that if you work at a company that offers retirement plans where employers match your yearly investment you can get by with investing $2,250 per year.
Our dollars can grow a lot thanks to compound interest, however many people wonder when is the best time to start contributing. And the best answer for that is honestly as early as you can.
Think about it.
Say you put away $10,000 a year from age 25 to 40. By the time you hit 65 you’ll have made more money than someone who started at 35 and invested $10,000 per year up until they’re 65. This is because of compound interest as the compound interest had more time to work from 25 to 65 than 35 to 65.
But even while it pays to invest early it doesn’t mean all hope is lost. If you are someone who is starting to invest later on in life, it’s important during that time to be investing more in it for the years to come. As mentioned above you’ll need to invest $4,500, however that number doubles if you are age 30 ($9,000 per year) and doubles again if you’re 40 ($18,000). If you’re starting at 50 though, you’ll need to put down $40,000 a year if you want a good shot at hitting that million dollars.
This goes to show that there is no age restriction to hitting your money goals. That is important to consider because it does actually break the emersion of retirement for a lot of us. Because while a lot of people will say yes to becoming a millionaire most will say they’re not ready to retire early.
This idea goes against those who have actually retired early who have stated that while money is certainly important, it’s not the only factor in determining when someone should retire let alone save.
For example, many early retirees have said that it’s important to know how much money you actually need in order to retire. That number can fluctuate widely and it’s based on two factors. First is your own cost of living, but also the potential you have for passive income and growth in your investments. This means that leaving a corporate job isn’t the end of your financial prosperity if your cost of living is low enough that both investments and other sources of income can support your lifestyle.
At the end of the day, retirement isn’t retiring at the specific age of 65 but rather the age where you can afford to not work and live the lifestyle that you want to have. This is important to consider as we all pursue retirement, whatever that age happens to be for us.