If you're just entering the workforce retirement probably seems like a lifetime away. A million dollars by retirement? That's someone else's dream, right? It doesn't have to be. Here we provide a millionaire's retirement plan. For these calculations, assume an average annual return of 8%, adjusted for inflation at 3% - a reasonable estimate of average market returns. (For background reading, see Financial Planning: It's About More Than Money.)

Retirement Planning
Age 25: A Good Beginning
You're 25 and landed that first job on your career ladder - congratulations! Before you start living to your new paycheck's standards, budget your retirement savings. If you have a 401(k) plan that matches your contributions, use it! These matching dollars are like a guaranteed return on investment. If you don't have a matching 401(k), look for a mutual fund through an investment firm with low fees; many now offer target funds, which allocate your investment risk with your targeted retirement year in mind - great for a beginning investor. (To learn more, read Pick 401(k) Assets Like A Pro.)

Choose a Roth IRA if you can; you don't get to deduct your contributions from your taxes, but you'll enjoy tax-free withdrawals at 65. Plan to start by saving about $200 a month to reach your millionaire goal; increasing this monthly amount by annually as your salary increases will only speed up your saving.

Age 35: Rolling Along
If you've been following the plan, by now you will have saved about $45,000 and have grown into a career with a bigger paycheck, but often, family commitments like children and a mortgage, will seem more pressing than saving for your golden years. Don't make the mistake of slowing down your retirement savings. Now is the time to ramp up your contributions to about $400 a month - remember that a matching 401(k) will help you in attaining this amount.

If you have kids and worry about saving for their college, look at it this way: the best way to help them in the future is by ensuring you're financially sound in retirement. (For more college funding ideas, see 6 Ways To Fund A College Education.)

Age 45: Holding Steady
You're mid-career, and things are looking good in your retirement portfolio. Your savings have grown to about $160,000 - not bad, but it still isn't quite time to slow down. Increase your retirement contributions to about $450 a month or more, and you'll be rolling your way to millionaire status by 65.

Age 55: Close to the Finish Line
By age 55, your retirement portfolio should be at $400,000 or so. You can start to see the finish line, but begin to wonder about risk. If you've been investing in a target fund, your portfolio has been adjusting its allocation for you; otherwise, look at adjusting some of your investments to reflect a lower risk tolerance. And remember: your income at, say, age 70 won't be withdrawn for another 15 years - plenty of time to ride out market fluctuations. (Learn more in Why should investors pick less risky investments as they approach retirement?)

At age 55, expect to really ramp up your retirement contributions, to roughly $600 a month, and more if you can manage it. The more you save, the sooner you can leave the nine-to-five behind.

Age 65: Prudent Asset Management
You're at the finish line: a millionaire at 65! Since you have no way to add to your savings now that you're out of the workplace, prudent asset management is vital. Keep a close eye on your portfolio so you can make your nest egg last. Protect yourself against inflation as well as market risk, and you'll be enjoying your golden years without financial worries.

The Bottom Line
With steady savings and smart financial habits, you can retire a millionaire - maybe even before you're 65. (For more tips, see How Much To Save To Become A Millionaire.)

Related Articles
  1. Retirement

    Top Retirement Community Developers

    Learn which companies are the top developers of communities for active adults and the history behind each of these popular and well-known companies.
  2. Professionals

    Are ETFs a Good Fit for 401(k) Plans?

    The popularity of ETFs among investors and advisors continues to grow. But are they a good fit for 401(k) plans?
  3. Professionals

    Do Robo-Advisors and Retirees Mix?

    Robo-advisors have democratized investing for many, but can they help retirees? Here are some things to consider before choosing one as a retiree.
  4. Professionals

    How to Create a Client Investment Policy Statement

    Investment policy statements are vital for financial advisors and their clients. Here are some tips for creating them.
  5. Retirement

    The 5 Best Retirement Communities in Fort Myers, Florida

    Discover why Fort Myers, Florida has become a popular retirement destination, and learn about five of the best retirement communities located in the city.
  6. Retirement

    Using Your 401(k) to Pay Off a Mortgage: The Pros and Cons

    Learn the advantages and drawbacks of using assets accumulated within a 401(k) retirement savings plan to pay down a mortgage balance.
  7. Retirement

    When Annuities Are the Wrong Investment

    Understand how annuities provide several unique benefits, but many drawbacks as well, and identify the situations where they are not the best investment.
  8. Retirement

    Should Retirees Still Have Mortgages?

    Identify the pros and cons of keeping a mortgage into retirement, and understand in which situations it is beneficial not to pay off a mortgage.
  9. Retirement

    The 5 Best Retirement Communities in Beaufort, South Carolina

    Discover why the Hilton Head area of South Carolina is a popular destination for retirees, and learn about the top five retirement communities in the area.
  10. Retirement

    Annuities Vs. Bonds: Which One Is Better For You?

    Compare the important features of annuities and bonds, and understand which investment vehicle is the better choice based on retirement goals.
  1. Are estate distributions taxable?

    In general, most estate distributions are not subject to income tax. In some cases, however, a distribution from an estate ... Read Full Answer >>
  2. What is the annual contribution limit for a 529A account?

    Contributions to a 529A plan are limited up to the annual gift tax exclusion limit, currently $14,000 a year in after-tax ... Read Full Answer >>
  3. What happens to a 529A account when the beneficiary dies?

    According to the Achieving a Better Life Experience Act of 2014 (ABLE Act), when the designated beneficiary of a 529A account ... Read Full Answer >>
  4. Can you have more than one 529A account?

    According to the Achieving a Better Life Experience Act of 2014 (ABLE Act), a disabled person can generally set up only one ... Read Full Answer >>
  5. What is the size of the average retirement nest egg?

    According to a 2015 Government Accountability Office (GAO) study, people between the ages of 55 and 64 with any retirement ... Read Full Answer >>
  6. Can I borrow from my annuity to put a down payment on a house?

    You can borrow from your annuity to put a down payment on a house, but be prepared to pay an assortment of fees and penalties. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!