Can you retire a millionaire if you have no savings at 50?

In a perfect world, we would all start pocketing a substantial portion of our retirement income as soon as we enter the workforce. But the reality is that many people don’t start saving for retirement until their 30s or 40s. For some, it’s even later.

Starting late can leave you understandably worried about whether you can save enough for retirement. The answer is not as clear as one might think. Below, we’ll look at several factors that influence your likelihood of retiring as a millionaire if you don’t start saving until age 50.

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The 3 factors that influence your chances of becoming a millionaire in retirement

Each time you start saving, these three factors affect the amount you ultimately get:

1. The amount of your contribution

The more you are able to set aside each month for retirement, the more you’ll end up with, assuming you’ve invested wisely and avoided early withdrawals. Your budget and the retirement account you choose determine how much you can set aside.

For current tax accounts, 401(k)s allow adults under 50 to contribute up to $20,500 in 2022, while IRA only allow up to $6,000 in annual dues. But adults 50 and older can contribute more to both types of accounts. The maximum contribution for adults 50 and older is $27,000 for 401(k)s and $7,000 for IRAs this year.

2. Rate of return on investments

The value of your portfolio fluctuates over time based on the value of the investments you hold. In some years, you might see your nest egg grow by 30% or more. And in other years, you risk losing money. Historically, the stock market has averaged an annual return of around 10% over the long term.

But you can’t bet on that. There’s no way to know exactly how fast your money will grow, so it’s usually best to be conservative in your estimates. Expect an annual rate of return of 5% or 6% as a safety measure. This way, you won’t be caught off guard if your investments underperform.

3. How long should your money grow

Someone hoping to retire at 65 will need to save a lot more per month to become a retired millionaire than someone planning to retire at 80. If you haven’t already thought about when you’d like to retire, do so. Without this information, you cannot determine how much you need to save per month.

If you are unable to save as much as you would like, this is the easiest variable to adjust. Delay retirement can help effectively close a savings gap, giving you more time to save while shortening the length of your retirement and giving your investments more time to grow.

put it all together

So now we return to our question of whether it is possible to withdraw a millionaire if you have no savings at 50. The answer is technically yes. Anything is possible if you are motivated and have plenty of extra cash to put away on a regular basis. But let’s look at a realistic example.

Let’s say you are 50 and would like to retire at 70. This gives your savings 20 years to grow. If you’re projecting an average annual rate of return of 6%, you’ll need to save about $2,195 per month to reach your goal if you’re starting from scratch.

This is going to be a stretch for most people. And if you don’t have access to a 401(k), you might have a hard time deciding where to put your money. You may be forced to use a taxable brokerage account, which does not have the same tax advantages as a retirement account, in order to accumulate enough money each year.

If that’s not feasible for you, you might still be able to pull off a millionaire, but you’ll have to adjust your expectations. Delaying retirement by five years may not be ideal, but it can reduce your monthly savings goal by $2,195 to $1,472 per month. And you might be able to get by with even less than $1 million in personal savings, depending on your retirement goals and timeline.

Rather than aiming for that arbitrary number, try determine how much you will need to give you the retirement you want, then make the necessary adjustments to your plan. Remember to check your progress every year to see if you need to make any changes to your savings strategy.

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