If you had asked me if it was possible to save $1 million for retirement when I was in my early 20s, I probably would've answered with, "Yikes, that's a lot of money." But now that I'm -- well, let's just say a bit beyond my 20s (and leave it at that), I've realized that a $1 million retirement nest egg is more than doable.
In fact, I'm on track to reach the $1 million mark by retirement. But I didn't get there by accident.
I've been making a concerted effort to build up my retirement savings. Here's what I've done so far and intend to continue doing to meet my goal.
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1. Living below my means
My husband and I bought our current home 15 years ago, right before having kids. I initially thought we'd stay put for a few years and then upgrade, but we never did that.
Once we had kids, we realized how expensive they are. We also realized that taking on larger housing payments would limit our ability to fund our retirement savings, so we opted to stay put. While we hardly live in a shack, more space would've been nice.
Sacrifices like these have kept my long-term savings on track. And I don't just live below my means in the context of housing: I drive a 10-year-old minivan that's seen better days, and many of our vacations through the years have been budget road trips. Not spending on these things frees up money for my nest egg.
2. Funding my retirement savings consistently
I started saving for retirement in my 20s and have continued to do so year after year. That includes periods when my income declined or unplanned expenses, like major home repairs, got in the way.
When my income dropped the year I had twins and was left with less time to dedicate to my work, my family cut back on spending tremendously to make it possible to still fund our long-term savings. And when we got hit with a few back-to-back years of home repairs, I took on extra work to make sure I was funding my retirement account in a manner I was happy with.
It would've been easy enough to say, "Well, guess I won't be saving for retirement this year" during either of those periods. Instead, I pressed forward.
3. Using the power of the stock market to grow my nest egg
There's only so much money I can afford to part with for retirement savings purposes each year. But I'm using the power of the stock market to help increase my savings. I've been investing in stocks for many years, and thankfully, that's led to a nice amount of growth in my portfolio.
You're never guaranteed a specific return in a stock portfolio, and there's always the risk of losing money. But historically, the stock market has rewarded investors who have stuck with it for the long haul.
To illustrate how helpful it can be to invest for retirement using stocks, socking away $500 a month over 40 years will lead to a balance of about $1.5 million in a portfolio earning a yearly 8% return, which is a bit below the stock market's average. But you'll be getting to that $1.5 million, despite only contributing $240,000.
I recognize that I'm fortunate to have been in a position to save for retirement all these years. Some people don't earn enough to do that. But I've also made a huge effort to get my savings to where they are today. Because of this, I'm able to set my sights on $1 million by the time retirement rolls around.
