On Track to Millions

Your Road Map to Wealth

Jean Chatzky

Becoming a millionaire may sound impossible.Millionaire may strike you as a term that’s meant for other people, not you. But that’s just not true.

How long you are willing to give yourself to achieve that goal directly shapes how much money you must sock away each year to get there. If you have 30 years to stockpile your million—as many people aiming toward retirement do—then you have to come up with only $675 a month or $8,100 a year. If you are getting matching dollars from an employer’s 401(k) or other similar retirement plan, you don’t even have to come up with all of that money yourself.

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If you want to reach your goal in half the time, I can show you how that picture works as well. But whether there’s an employer match in the picture or not, you’re going to have to be more aggressive in your savings (and perhaps your earnings as well). Whatever timetable you’re looking at, if you put your mind to it, it can be done.

The Millionaire Math

Here’s what happens to your money when it’s put away to grow tax-free:

The 30-Year Millionaire

If, starting today, you can find $675 a month to invest tax-deferred at 8 percent, 30 years from today you will have your $1 million. Here’s where 401(k) plans are so useful. If you are in a 401(k) plan that matches your contribution, you may have to come up with much less money yourself.

If your plan matches 100 percent, you need to save and contribute $328.50 a month.

If your plan matches 50 percent, $450 a month.

If your plan matches 25 percent, $540 a month.

Saving and Investing $675 a month:

Five years: $ 49,596

10 years: $ 123,488

15 years: $ 233,575

20 years: $ 397,588

25 years: $ 641,942

30 years: $ 1,005,992

The 25-Year Millionaire

If, starting today, you can find $1,050 a month to invest tax-deferred at 8 percent, 25 years from today you will have $1 million. Again, watch a 401(k) plan with a match work its magic.

If your plan matches 100 percent, you need to save and contribute $525 a month.

If your plan matches 50 percent, $700 a month.

If your plan matches 25 percent, $840 a month.

Saving and Investing $1,050 a month:

Five years: $ 77,150

10 years: $ 192,093

15 years: $ 363,340

20 years: $ 618,417

25 years: $ 998,557

30 years: $ 1,564,877

The 20-Year Millionaire

If, starting today, you can find $1,700 a month to invest tax-deferred at 8 percent, 20 years from today you will have your $1 million. With a 401(k) match, you need even less.

If your plan matches 100 percent, you need to save and contribute $850 a month.

If your plan matches 50 percent, $1,133 a month.

If your plan matches 25 percent, $1,250 a month in the plan and invest another $140 outside your plan.

Saving and Investing $1,700 a month:

Five years: $ 124,910

10 years: $ 311,008

15 years: $ 588,264

20 years: $ 1,001,334

25 years: $ 1,616,744

30 years: $ 2,533,611

The 15-Year Millionaire

If you want to get to your million in 15 years, you will need to find $2,900 a month to invest at 8 percent, tax-deferred. If you are in a 401(k) plan that matches, you can contribute up to $15,000 a year or $1,250 a month. You should save and contribute the maximum you’re able.

If your plan matches 100 percent, you’ll need to invest an extra $400 outside your plan—or $1,650 total each month to meet your goal.

If your plan matches 50 percent, invest $1,025 outside your plan—or $2,275 total each month to meet your goal.

If your plan matches 25 percent, invest $1,338 outside your plan or $2,588 total each month to meet your goal.

Saving and Investing $2,900 a month:

Five years: $ 213,082

10 years: $ 530,543

15 years: $ 1,003,510

20 years: $ 1,708,159

25 years: $ 2,757,976

30 years: $ 4,322,042

Spend Less to Save More

• Save $40 a month by choosing a cell phone or a landline but not both.

• Save $35 a month by reducing your homeowners or auto insurance costs by raising your deductible from $250 to $1,000 on each.

• Save $100 a month by deciding your future is worth one less night out each week.

• Save $100 a month by making every effort to be energy efficient. Spend less on heat when you sleep. Insulate where appropriate.

• Save $120 a month with a grocery list and don’t go to the store hungry.

• Save $200 a month by paying off your old car and not replacing it with a new one.

• Save $40 a month by bundling your cable and Internet services or go to a basic package.

• Save $80 a month by reclaiming a household chore you once paid for. Wash your car yourself, bathe the dog, hand wash rather than dry clean those sweaters.

• Save $100 a month by not shopping. I acknowledge that you may not be able to stop shopping completely because there are gifts to buy and necessities to pick up. But you and I both know you spend a lot of your money on items that are disposable as well.

• Save $75 a month by trimming the takeout tally. We spend too much money on food on the fly. Buy coffee instead of a cappuccino and a less expensive sandwich instead of sushi.

• Save $50 a month by not procrastinating. Certain things cost more when you purchase them at or close to the time you need them— shipping, vacations, patio furniture, holiday decorations—you get the idea.

The final key to your quest for a million is putting all this money where you can’t get your hands on it. That means having it funneled out of your paycheck automatically and putting it into your retirement plan. You want to make sure you grab as many matching dollars as possible. After you exhaust your ability to contribute to a 401(k), then put money into the following accounts in the following order:

Roth IRA

SEP-IRA, Koegh or Roth 401(k) for the self-employed

Tax-deductible IRA

Nondeductible traditional IRA

529 college saving plan

Health savings account

The choice is up to you, and my suggestion is you choose wealth.