Having a million dollars sitting in your bank account sounds pretty nice, right? My personal opinion is that the majority of Manitobans would feel pretty comfortable in their retirement plans with that kind of dollar value attached to their names.
Short of winning the lottery or a surprise inheritance from a wealthy, estranged relative, how do you get to a million dollars? The most straightforward approach is to set money aside into your investment accounts on a regular basis. The more you contribute, the higher your projected investment returns, and the more time you have on your side, the easier it is to hit this (or any) milestone with your funds.
To see what I mean, take a look at the table below to evaluate how big of an impact each factor can have in your plans:
|
Monthly Contributions Required to Save $1,000,000 |
||||
| Number of Years | Earn 2% per year | Earn 4% per year | Earn 6% per year | Earn 8% per year |
| 30 | $2,032/mth | $1,455/mth | $1,021/mth | $705/mth |
| 25 | $2,574/mth | $1,959/mth | $1,471/mth | $1,093/mth |
| 20 | $3,393/mth | $2,739/mth | $2,195/mth | $1,746/mth |
| 15 | $4,767/mth | $4,074/mth | $3,469/mth | $2,943/mth |
| 10 | $7,529/mth | $6,795/mth | $6,125/mth | $5,516/mth |
| 5 | $15,842/mth | $15,061/mth | $14,322/mth | $13,621/mth |
The biggest takeaways when we look at the numbers up close is that nothing beats starting early! Having 30 years on your side, instead of 20 years, requires less-than-half the savings rate, regardless of investment performance! Having time on your side for compounding, which allows your money to make money, is simply the biggest value you can add.
Market returns are never guaranteed. If you’re relying on large investment gains to hit your objectives, you reduce your odds of success. Instead, focus on the variables you can control:
- Increase your savings rate. Easier said than done! Revisiting your budget with an eye for expense reduction can definitely help in finding additional savings dollars.
- Keep taxes to a minimum. Smart usage of registered accounts and investment allocation can reduce the eroding effect that taxation has on your investment returns.
- Build risk-appropriate portfolios. Diversification in your investment portfolios is key to reducing downside risk. Work with a professional to design an investment plan that suits your timeframe and objectives.
- Adjust your savings with inflation. We know the cost of everything goes up over time. If you haven’t adjusted your savings rate in years, consider upping it regularly as a habit! You’ll be surprised how much less you notice incremental increases compared to sudden, drastic changes.
The best time to start investing for your goals was yesterday. The next-best time is today. Consider working with a professional Financial Advisor to bring your vision to a reality, sooner than you might think.
Recent Comments