Can You Build a $2M Retirement Nest Egg By Saving $358 a Month?
Written by
David Nadelle
Edited by
Nicholas Morine
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There is no shortage of stories explaining what it takes to build a necessarily large retirement nest egg. For the longest time, $1 million was considered a substantial retirement sum. Now, those hoping to be wealthy later in life want double that amount for retirement living, future expenses and unexpected medical or home emergencies.
Could it realistically be feasible to get to this $2 million mark by putting away only $358 a month? It depends on what that $358 is doing for you behind the scenes in the investment market, of course. Keeping your money tied up in savings accounts does very little, but investing $358 into the stock market monthly — and earning an average annual rate of return of 10% over 40 years — you could reach that $2 million goal, according to NewsBreak.
Admittedly, there are a few numbers listed above that might cause you some concern. First, $358 might not be an easy sum to sock away each month during a time when every dollar is worth less and buys less. Second, most people might not have a 40-year stretch to complete this type of investment plan. If you haven’t started saving earlier in life, a shorter time frame — and a bigger investment — would be required. Finally, a 10% rate of return seems generous and, for financial skeptics, possibly too optimistic to take such a substantial monthly risk.
However, that 10% rate of return may not be as impossible as it looks. Generally speaking, the stock market can be a gamble in the short run but a surprising earner if you monitor performance over time. If you look at the S&P 500 index over 50 years, it has had an average annual return of 9.4%. With that being said, most people tend to plan a bit more conservatively by using an estimated 5-6% average annual rate of return for retirement planning purposes.
The element of risk is just one factor that might stymie your end goal of $2 million. Others might include forgetting to account for sky-high inflation or poorly estimating a future benefit or pension. If you are unable to save your desired amount each month, you may have to do a rethink and figure out where you can find new income avenues — or which expenses you can cut now in order to save for your future.
Keeping on top of your spending and savings, familiarizing yourself with potential Social Security benefits, 401(k) matches and pensions, and accurately estimating your retirement incomes and expenses will help you better evaluate your retirement plan. Regardless, $2 million is an ideal number. What is most important is starting a rock-solid savings and investment plan and sticking to it — if your final nest egg happens to be around $2 million, so much the better.
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