Saving $1 million is an attainable goal with the right strategies. It does require careful planning and self-discipline. Your age, retirement plans, investment choices, and risk tolerance all play significant roles in your journey. The more you save regularly, the less risky your investments need to be, and the sooner you can reach that milestone.

Begin Saving Immediately

If you're 35 and starting with nothing, you should aim to save about $735 monthly to reach $1 million by age 65, assuming an 8% average annual return. At 40, you'd need to save around $1,135 each month. If you choose a riskier investment approach and achieve a 10% annual return, your monthly savings would drop to approximately $506 at age 35 or $850 at age 40. Of course, being more conservative means saving more. For personalized calculations, use the SEC's calculator.

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Remember, these figures don't account for investment costs like management fees, which can reduce your annual returns by over 2%. Therefore, you may need to save more or take on additional risks to meet your targets. Also, consider the impact of inflation and taxes.

Maximize Retirement Contributions

The best way to save for retirement is through tax-advantaged accounts such as a 401(k), 403(b), traditional IRA, or Roth IRA. These accounts allow your investments to grow tax-free, which significantly boosts your long-term savings.

If your employer offers a retirement plan, set up automatic payroll contributions. For 2024, the contribution limit for 401(k)s is $23,000, or $30,500 if you're over 50. If your employer matches contributions, ensure you're contributing enough to take advantage of that benefit!

Once you max out contributions to your workplace plan, you can still contribute an additional $7,000 (or $8,000 if over 50) to a traditional or Roth IRA. Roth IRAs allow you to withdraw funds tax-free in retirement, making them an excellent option.

If you lack access to a company plan or are self-employed, consider setting up a SEP IRA or Individual 401(k) to continue building your retirement savings.

Consider Taxes and Inflation

It's crucial to recognize that $1 million today won't have the same purchasing power in 25 years. With an average inflation rate of 3%, it would only be worth about $475,000 in the future.

If you aim for an inflation-adjusted $1 million by age 65, you might need to save over $2,600 monthly from age 35 or $3,200 monthly from age 40, assuming an 8% return and excluding fees or state taxes. This may sound intimidating, but it emphasizes the importance of starting early or considering a later retirement to achieve your savings objectives. Hopefully, you have some savings to build upon. Saving any additional cash—like bonuses or tax returns—into tax-advantaged accounts can significantly help. Opt for low-cost investments like index funds or ETFs. Whatever your target, the key is to start saving something now to grow your wealth and move closer to that $1 million goal.