Save $1 Million for Retirement by Saving $10 a Day But You Have to Start Early

Saving $1 million or more by retirement age might seem daunting, but the process can be manageable if you begin early.

Rather than concentrating on the total amount saved, focus on your savings rate. This rate represents the percentage of your annual pre-tax income that you contribute to your retirement investment account.

When beginning to save for retirement, having a goal in mind can be beneficial. However, it is essential to recognize that your retirement account balance can be influenced by external factors like market volatility. In contrast, your savings rate is an aspect you can control.

Average recommendations are a savings rate of at least 15%, which includes any employer match. However, it is acceptable if contributing that amount is not initially feasible for you. You can start your retirement savings journey by setting aside $10 a day, which amounts to $70 a week.

If you start saving at age 21 and allocate approximately $70 a week into a retirement investment account with an annual return rate of 7%, you would accumulate just over $1 million by the time you reach age 65.

A $70 weekly contribution to a retirement investment account can grow significantly if you start at ages 21, 25, or 30. However, these calculations do not account for unpredictable factors such as salary increases, periods of unemployment, or market volatility.

If you start at 21

• Earning a 5% annual rate of return: $585,651
• Earning a 7% annual rate of return: $1,079,289
• Earning a 9% annual rate of return: $2,072,512

If you start at 25

• Earning a 5% annual rate of return: $466,418
• Earning a 7% annual rate of return: $803,588
• Earning a 9% annual rate of return: $1,435,563

If you start at 30

• Earning a 5% annual rate of return: $347,239
• Earning a 7% annual rate of return: $551,394
• Earning a 9% annual rate of return: $902,121

Starting Your Retirement Savings Journey

While a 401(k) is an excellent option for building retirement savings, if your employer does not offer one, you might consider a Roth Individual Retirement Account (IRA) instead.

With a Roth IRA, eligible investors contribute using post-tax dollars. Consequently, the earnings grow tax-free, and withdrawals made during retirement are not subject to taxes or penalties, provided the account has been open for at least five years.

In 2024, the Roth IRA contribution limit is set at $7,000 for individuals under the age of 50 and $8,000 for those aged 50 and older. The income limits for Roth IRA eligibility in 2024 are between $146,000 and $161,000 for single and head-of-household tax filers. For married couples filing jointly, the income range is between $230,000 and $240,000.

Starting early and maintaining a consistent savings rate can significantly impact your retirement savings, potentially leading to a substantial nest egg by retirement age. While external factors like market volatility and employment changes can influence your retirement account balance, focusing on controllable factors such as your savings rate and taking advantage of tax-advantaged accounts like Roth IRAs can provide long-term benefits. 

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