What you Really Need to Retire Wealthy

Time.

There, I said it, the key to the universe of wealth and a lifetime of money is time. If you’re over the hill of course, this doesn’t mean you are counted out either, but it is going to be tougher for you since you have less time to take advantage of compounding. How much are you gonna need to retire a millionaire? A recent article at Yahoo Finance has the answer, assuming an 8% annual return and a retirement age of 65:

• At Age 25, starting at 0: You are going to need a mere 286$ per month to retire at 65 with a million dollars.
• At Age 35, starting at 0: That number increases to 671$ per month. This is manageable but that’s some aggressive savings

It’s amazing what just 10 years of saving can make, right? There are additional figures for those over 35 as well, they can be found here.

Now, while $286 per month should be manageable by a young person at the age of 25, its important to take into account one key variable: inflation. A million dollars is worth quite a bit now, but it’ll be worth substantially less (huge rate cut by the Fed today, anyone?) by the time you hit 65. With this in mind it’s important to take the above numbers with a grain of salt. You’ll likely want to well overshoot these savings goals to compensate for the degrading effect inflation will have on the value of money.

For the record, I hate inflation.

-Xias