Although young people may have various economic goals such as buying a car or saving for a house, experts agree that thinking about early retirement should also be a priority.
And the sooner you start, the easier it will be for you to become a millionaire. Just invest $1,000 a month throughout your career to become a millionaire, according to CNBC.
And according to Vanguard, the secret to reaching the million is not so difficult: it is now.
If you give your savings enough time to grow, you'll only need relatively small investments, made consistently, to break even sizable, Vanguard explains on its website.
"Because songwriting is so powerful, starting early gives you more flexibility later in life," according to Vanguard.
Keep in mind that only half of Americans have calculated how much they need to save for retirement, according to the Department of Labor (DOL).
Additionally, in 2020, more than a quarter of private sector workers with access to a defined contribution plan, such as a 401(k), did not participate. To put that in context, the average American spends about 20 years in retirement, so saving money is a habit you should start early, the DOL recommends.
“Retirement is expensive. Experts estimate that you will need 70% to 90% of your pre-retirement income to maintain your standard of living when you stop working," according to the DOL.
CNBC has dug deep to estimate exactly how much investing an extra $1,000 a month will be when you're ready to retire, assuming you put your money in a retirement account, get an estimated 4% return on your investments, and retire. . 67 years old.
CNBC also warns that the calculations don't take into account fees, taxes, or "whatever curveballs life may throw at you, so plan accordingly."
This is the breakdown, according to CNBC
If you start saving $1,000 a month at age 20, it will grow to $1.6 million when you retire at age 47. For people who start saving at that age, monthly payments add up to $560,000: the early start combined with the estimated 4% over the years means their investments have ballooned to about $1.1 million.
"Starting younger allows you to harness the power of compound interest," says CNBC. "This means that she will get returns on the money she invests and, better yet, returns on her returns."
If you wait until you're 30, you'll still make over a million dollars. At that age, you will have set aside $444,000 and earn almost $600,000 in earned interest.
“There is a tendency, the longer you wait, the more money it will cost you in the long run. If you start making these savings at age 40, they will add up to $500,000 for your retirement, with over $300,000 set aside and $250,000 returned.
And if you start at age 50, you'll retire on $300,000 at age 67, having invested $204,000 and getting back $90,000 in interest.
"So if you're wondering when to start saving, it's now," says CNBC.