dollarWhen I first started my financial planning career in 1990, a million dollars seemed like a million miles away. Of course now that I’m older and have been saving since I was in my twenties, I have first hand knowledge that it CAN be done. You just have to understand that the sooner you start, the more change you have of reaching that million dollar mark. My father taught me early in life to save 10% or more of my income and that habit has served me well.
But how is it done? Why would you want to reach a million dollars in investments?
Often in life, you have goals that you wish to accomplish. Let’s say, for instance, you have actually identified that you want to have one million dollars in your investment portfolio by the time you retire. But will you have the ability to make that dream come true?

In trying to accumulate one million dollars (or any other quantity), you need to take into consideration where you are currently.

Present balance– your starting point

Obviously, the more you have saved already, the less you could need to contribute to your investment portfolio or earn on your financial investments over your time horizon.

Time (accumulation period)

As a whole, the longer your time horizon, the better the chance you have to get to that $1 million figure. I was in my twenties when I started with my goal. If you have a long enough time horizon and have already saved a large enough amount, with ample income you might be able to reach your goal without making any type of extra payments. With a longer time perspective (like I had), you’ll additionally have more time to recoup if the value of your financial investments declines. If you need to add extra money to get to your goal, you won’t have to contribute as much since you will have more time to get those extra contributions in.

The earlier you start making payments to your investment account, the better. If you wait too long you might be incapable to make the bigger payments that would be required to reach your objective. In such a case, you could think about whether you can expand the accumulation duration– for instance, by delaying retired life.

Investment Returns

In general, the better the rate of return that you can earn on your investments, the more likely that you’ll reach your financial investment objective of one million dollars. The greater the proportion of the investment portfolio that comes from profits, the less you might have to add to the portfolio. When you have a longer time horizon, you are taking advantage of compound interest. In other words, your earnings earn returns, and those earn more returns, and so on.

Keep in mind that higher rates of return are usually associated with greater investment risk and also the potential to lose money. You’ll want to choose financial investments that meet your time horizon as well as your risk tolerance level. Here in my office we use a program that gives you a score from one to 100 based on your answers to questions that deal with your actual portfolio. It also scores your existing portfolio since most people have no idea how much risk they are actually taking. It also helps you be more practical in your presumptions. What rate of return is practical provided your existing asset allocation and financial investment choice? You can certainly do this on your own, but many planners have tools that aren’t available to consumers.

Number of Payments

Certainly, the more you could consistently contribute to your account (e.g., month-to-month or annual), the much better your opportunity is of reaching your one million dollar financial investment objective, specifically if you begin adding very early and keep a very long time perspective when choosing the actual investments. (Do I sound like a broken record here?)

Contributions needed.

Consider this: At a provided rate of return, just how much do you have to save each year to reach the one million dollar target? As an example, assume you think that you could gain a 6% annual rate of return (ROR) on your investments. If your current balance is $450,000 and you have 15 more years to reach that target, you don’t need to make any kind of added contributions (see circumstance 1 in the table listed below); yet if you wait just 10 more years, you’ll have to make annual payments of $14,728 (see circumstance 2). If your present balance is $0 and you have 30 years to get to $1 million, you’ll need to contribute $12,649 yearly (see circumstance 3); however if you have just 20 more years, you’ll have to contribute $27,185 each year (see circumstance 4).
Basically this is just showing you what I’ve been stating all along. Start early and be consistent with your contributions as it will be much easier to hit that goal.

Circumstance 1 2
Target $1,000,000 $1,000,000
Current balance $450,000 $450,000
Years 15 10
ROR 6% 6%
Annual contribution $0 $14,728
Circumstance 3 4
Target $1,000,000 $1,000,000
Current balance $0 $0
Years 30 20
ROR 6% 6%
Annual contribution $12,649 $27,185

Note:  This hypothetical example is not intended to reflect the actual performance of any investment. Actual results may vary. Taxes, fees, expenses, and inflation are not considered and would reduce the performance shown if they were included.

Don’t lose your money:

When you are within about five years of retiring or needing your money, it’s critical that you don’t lose a big chunk of your investments.  The reason is that if you need it within about 5 years, and you lose 20% of it, you won’t have the investment time horizon to earn that money back.  And take this into consideration:  If you have $100 and lose 20%, you now have $80.   If you gain 20% the next year, you have earned $16. This will not bring you up to the $100 that you had before, even though your “average” is zero.  Your average return is zero, but in reality you are in the red, and have lost money.


Yes, you can get to one million dollars, as long as you start early enough and choose the right investments that will help you get to your goal.  Work with a planner who knows your specific situation because this blog is not to be construed as investment advice.

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