Money Management

It’s going to take some serious saving to reach this amount. 

For people who save diligently, retiring as a millionaire or even a multimillionaire is a realistic goal. It’s quite a bit harder to retire with $10 million, which puts you near the top 1% of net worths. If this is a goal of yours, or if you’re just curious about what it would take, we ran the numbers to find out.

Here’s how much you need to save per month to retire with $10 million

To reach $10 million by retirement, your age and your portfolio’s annual return determine how much you need to save. If you start at a younger age, you won’t need to save as much per month. Returns vary, since stock prices go up and down, but a 10% annual return is a reasonable estimate. That has been the average stock market return for the past 50 years.

With a 10% annual return, and a goal of retiring at 65 with $10 million, here’s how much you’d need to save by age:

If you start at 20 years old, you need to save $1,159 per month.If you start at 30 years old, you need to save $3,075 per month.If you start at 40 years old, you need to save $8,473 per month.If you start at 50 years old, you need to save $26,228 per month.

Yes, those are some very big numbers. They also get a whole lot bigger the longer you wait. If you’re in your 20s or early 30s and you make a high salary, then it could be possible to save $10 million. If you start in your 40s or 50s, it’ll be extremely difficult.

Maximizing your income is a must

There are lots of ways to save more money and boost your retirement savings, but they only go so far. If your goal is $10 million, you’ll need a very high salary, probably $150,000 per year or more. That’s the key factor, because without a large income, it will be nearly impossible to save enough money.

Even if you aren’t set on getting to $10 million for retirement, maximizing your income is still worth it. After all, no matter how much you want to save, making more money will help you get there faster. Here are a few options to grow your income:

Further your education. Research shows that people with higher levels of education make more money on average. Depending on your field of study, an advanced degree could be your ticket to a high salary.Start a business. It takes time to build a successful business, but this is also one of the best ways to raise your earning potential.Regularly seek out raises or new job opportunities. If you have a full-time job, find out how you can move up and earn more every year. If you can’t do that with your current employer, go job hunting, as changing jobs is often how people increase their income the most.

Investing your way to $10 million

While your income matters most, how you invest your money will also determine how much you can save. To have a chance at reaching $10 million, you’ll need to squeeze out every last drop of extra cash available to you. That means taking advantage of tax savings offered through retirement accounts, getting your full employer match if you have a 401(k), and every other tool at your disposal.

Here are some tips on how to make the most of your money when you have a substantial savings target:

Contribute the maximum to your 401(k). The limit in 2023 is $22,500 if you’re under age 50 and $30,000 if you’re 50 or older.Contribute the maximum across individual retirement accounts (IRAs). The limit for combined contributions across IRAs and Roth IRAs in 2023 is $6,500 if you’re under age 50 and $7,500 if you’re 50 or older.Go heavy on investing in stocks. While some investors prefer a mix of stocks and bonds, stocks provide much greater growth potential.Consider opening a health savings account (HSA). Although this type of account is designed to pay for healthcare costs, you can also use your HSA as a retirement plan for the tax benefits it offers.Consider real estate investing. This could be a good way to increase your returns, especially since you can use leverage. Keep in mind that real estate investing isn’t easy and there’s risk involved, but it may help you reach your goals.

Even with good saving and investing habits, there’s a lot that has to go right to end up with $10 million. No one truly needs this much money, so don’t put pressure on yourself to reach that goal. However, the strategies involved, like increasing income and using every possible wealth-building tool, are valuable no matter how much you want to save.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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You might save money, but you’re taking on a big risk. 

There’s a reason the demand for homes hasn’t been quite as strong this year as it was in 2021. In 2021, mortgage rates sat at nice, affordable levels. But they rose sharply in the course of 2022. And at this point, you’re likely looking at more than twice the interest rate on a mortgage than you would’ve faced had you purchased a home in late 2021.

Given that home prices are also still up on a national level, that’s forced a lot of would-be buyers to pull out of the market. But what if you’re still in a strong position to buy a home? Better yet, what if you’re actually able to pay cash for a home?

Maybe you received an inheritance and are sitting on a few hundred thousand dollars. Or maybe you’re just a really diligent saver, and you’ve been steadily socking money away in your savings account for years. It could even be that you can buy a home outright in cash because you’re looking to purchase one in a fairly low-cost part of the country.

But is paying cash for a home a good idea right now? Here’s why it may not be.

You’re taking a big risk by parting with that cash

Buying a home in cash means not having to deal with the process of applying for a mortgage, and not having to pay loads of interest on one. You’ll also get out of paying closing costs, which are the various fees mortgage lenders charge to finalize a home loan.

If you have the cash to part with, the idea of skipping the mortgage may be appealing given where borrowing rates are at today. But that doesn’t mean that paying cash for a home is your best bet.

When you empty out your savings to swing a home purchase, you leave yourself vulnerable. Granted, you may not be depleting your savings entirely so much as removing a large chunk to swing a home purchase. But even so, let’s say you’re buying a home for $250,000. You might have another $50,000 left over for emergencies, which leaves you in a really great spot in theory.

But what if you own a small business that struggles in the coming years and ends up folding because you can’t get a loan to salvage it? Had you not parted with $250,000 to buy a home, you might’ve been able to save your business.

And if you’re thinking, “Well, I can always sell my home if need be to free up cash,” remember that finding a buyer isn’t guaranteed. Neither is getting a good price for your home.

There are other ways to put your cash to work

Mortgage rates may be high right now. But they could come down over time. Meanwhile, if you buy a home in cash, the money you’re spending is money you can’t invest and grow into a larger sum. That could mean missing out on different financial goals.

On the other hand, let’s say you take out a mortgage with a higher interest rate today, only borrowing rates drop in two years. At that point, you can always refinance your mortgage to a less expensive loan. And then you’ll still have all that cash to invest with.

All told, it’s easy to see why you may be inclined to buy a home in cash if the option exists. But think carefully before moving forward with that decision.

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It could give workers a lot more freedom. 

When you accept a new job, it’s typical to have to fill out a bunch of paperwork. That might include tax forms and a host of different contracts designed to protect your employer.

One such contract is a noncompete. Whether you sign one as its own agreement or as a clause within a larger employment contract, a noncompete effectively prohibits you from working for your employer’s competitors for a period of time after separating from that company. You might, for example, be asked to sign a noncompete that bars you from working for a competitor for six or nine months after you leave your job — whether voluntarily or due to a layoff.

But noncompetes can be very limiting. Let’s say you have specialized skills and work in a fairly niche industry. In that case, there’s a good chance that any other company that seeks to hire you will be considered a competitor of your employer. That could leave you in the very tough situation of not being able to work for several months — and having to utterly deplete your savings as a result.

But a new proposal could make noncompete clauses and agreements a thing of the past. And if it goes through, it could be a very positive development for workers.

When you’re held back by a contract

Right now, noncompetes aren’t illegal, though in some cases, they can be tough to enforce. But the Federal Trade Commission recently proposed a new rule calling for noncompetes to be banned. If it goes through, it could open the door to more employment opportunities for many workers who end up separating from their employers.

Not only does this new proposal seek to ban noncompetes, but it also seeks to cancel existing noncompetes that have already been signed. All told, almost every industry could be impacted by this change.

What makes noncompetes so frustrating for workers is that their language is often blurry and open to interpretation. Some noncompetes, for example, don’t clearly define what a competitor is. This makes it difficult to know what job opportunities workers are legally allowed to pursue once they separate from their employers.

Worse yet, workers aren’t released from their noncompete obligations in situations where they’re laid off through no fault of their own. Now, imagine you’re a dedicated worker who just lost their job due to your company’s need to downsize. You didn’t do anything wrong, and it wasn’t your choice to leave your job. Yet now you’re stuck with limited choices on finding a new role thanks to your noncompete. If this proposal goes through, all of that could change.

An important development

The National Employment Law Project estimates that more than 30 million workers — at least 18% of the total U.S. labor force — are forced to sign a noncompete as a condition of employment. Barring noncompetes could help ensure that millions of workers aren’t subjected to undue hardships in finding jobs due to these one-sided clauses and agreements.

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Don’t assume those benefits are a given. 

Will a recession batter the economy in 2023? It’s certainly a big concern for a lot of people.

In fact, experts spent much of 2022 warning that economic conditions will worsen at some point in the near future. And so it’s not unreasonable to think that a downturn could strike within the next 12 months. And that could lead to a notable uptick in layoffs.

Now the good news is that many people who lose a job through no fault of their own end up being eligible for unemployment benefits. Those generally won’t replace your missing paycheck in full, but they’re an income stream to fall back on nonetheless while you look for a new job.

But not everyone is eligible for unemployment. And if these circumstances apply to you, you may not be able to collect unemployment benefits if you find yourself out of work in 2023.

1. You didn’t earn enough money to qualify

Most states require you to have worked for a certain amount of time and earned a certain amount of money prior to applying for unemployment. If you don’t meet that requirement, you may find that your benefits claim is denied. The specifics here do vary by state, so there’s no universal amount of earnings that puts you in the “safe zone” with regard to unemployment eligibility. Rather, you’ll need to see what your specific state’s rules look like.

2. You’re self-employed

In 2020, when the start of the COVID-19 pandemic fueled a massive unemployment crisis, lawmakers changed the rules to allow self-employed people to temporarily receive unemployment benefits. But that emergency aid is long gone. And so if you’re self-employed and your workload dries up in 2023, you most likely will not be eligible to collect unemployment benefits from your state.

3. You’re unable to work

You might lose your job at a time when you’re about to have a baby, or when you need to take a break from work to help care for an injured family member. To qualify for unemployment benefits, you need to be able to perform a job and be available for one. If you can’t satisfy those requirements, you won’t be eligible for benefits.

Don’t assume unemployment benefits are a given

While many people who get laid off at work do end up qualifying for unemployment, that’s not automatically the case. And so it’s important to have a decent amount of cash in your savings account in case your main income stream disappears and you’re not able to get benefits from your state to help make up the difference.

In fact, at a minimum, you should aim to have enough money in savings to cover three full months of essential bills. Added savings will buy you even more protection in the event of a layoff. So while we’re not guaranteed to see the economy take a turn for the worse in 2023, it’s a good idea to prepare for that possibility by boosting your savings in case unemployment benefits don’t come through for you.

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Believe it or not, these could make a huge difference in your finances. 

Even if you’re relatively happy with the state of your finances, you may want to give your savings account a boost during the early part of 2023. There’s been talk that a recession could hit the U.S. economy at some point this year. And it certainly wouldn’t hurt to have extra cash reserves on hand in case your job ends up on the chopping block. With that in mind, here are a few lesser-known ways to grow your savings — and give yourself more peace of mind.

1. Skip the takeout meals

You might assume that ordering takeout isn’t such a big strain on your budget. After all, you’re not having a three-course meal at a restaurant that requires you to leave a giant tip. Rather, you’re picking up a pizza on your way home from work, or stopping in for burgers to go when you’re too tired or swamped to cook.

But while the occasional takeout meal might seem like an innocent enough splurge, in reality, it can lend to a higher credit card tab than you’d like. If you’re eager to boost your savings this month, cut out takeout entirely and make all of your meals from store-bought groceries — even if it means having to make changes to your schedule to allow for that.

2. Sell unwanted holiday gifts

Chances are, the gifts you received during the holidays in December were a mix of things you were stoked to get and items that are now simply taking up valuable space in your closets. It’s the latter items you can turn into a source of cash — and use the money to pad your savings.

Now the way you go about selling unwanted gifts will depend on what those gifts are. If it’s something bulky, you’ll probably want to try to find a local buyer so you don’t have to bear the cost of expensive shipping. But if it’s something like a purse or electronic device, you could turn to sites like eBay to unload it.

3. Become a home maintenance maven

Homeowners commonly shell out hundreds or thousands of dollars each year by virtue of having to hire people for help with upkeep. If you want that money to go into your savings account instead, become a home maintenance guru. Read through online guides, download some podcasts, and figure out what it takes to start doing more maintenance work yourself.

Now there’s one caveat here. You shouldn’t engage in home maintenance you don’t feel you have the skills or training for, because that could result in property damage or injury. For example, cleaning out your own gutters might save you $150 each time you do it. But if that work lands you in the hospital, it’s not worth the savings by any means. However, for low-risk endeavors, learning the right techniques could save you a bundle.

Saving money often boils down to making savvy choices. Follow these tips, and you may be pleasantly surprised to see just how much your savings account balance will grow.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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