#Help Me Retire: I’m 24, live with my mom and pay rent — I think I’ll need $2 million in retirement. How do I save that much?

How much would I need to retire on a $4,000 monthly budget assuming prices don’t go up for things too much in the next few decades? And how much would I need to save monthly?

I’ve been doing some calculations and if I retired at say 65, according to my calculations, I would need $2 million or more to live comfortably. Do you really need that much or are my calculations wrong? And is it even possible to save that much, even working a decent salary job? 

See: ‘I’m no hedonist’ but I want to build our next home for retirement, my wife says no. We’ve saved $3 million. What should I do?

Dear reader, 

I am so, so happy you’re already thinking about retirement, especially since you’re only 24 years old and have decades to go. This focus will absolutely help you in the long run, so congratulations!

I’m going to start by telling you something that may surprise you, or maybe even annoy you: the amount of money you save right now — at this moment — does not matter as much as the action of saving itself. And you won’t get to those retirement goals by just saving — investing will make that money really grow through the power of compound interest. I’ll get to that in a moment. 

“The key is not to get into the weeds with the numbers at age 24,” said Jordan Benold, a certified financial planner at Benold Financial Planning. Plans change, especially when you’re in your early 20s and have so many years to go until retirement. The keys to retiring comfortably in the future will depend on your ability to build a healthy savings and investing habit, increase your savings as you are able to afford it and stay debt-free (within reason — a mortgage is debt, but if you can afford the payments, it’s not bad debt). 

Also, life happens and sometimes you may have to take on a loan or consumer debt — just be conscious of your decisions, weigh all of your options and consult a financial professional when necessary. 

Many financial advisers suggest putting away 10-15% of income for savings, but that’s not always possible. Especially at your age, start with what you can. “Sure, the amount can and will make a difference over time, but starting with $20 a month with a plan to increase it to $50 a month in a relatively short time and then to move to $100 a month will make a huge difference in your ability to reach his goals,” said Robert Gilliland, managing director and senior wealth adviser of Concenture Wealth Management. “Your earnings can and will change over time, but you cannot go back and change what you did with the money in the past and that begins with the law of compound interest.”  

Check out MarketWatch’s column “Retirement Hacks” for actionable pieces of advice for your own retirement savings journey 

Compound interest is a magical thing. At its core, it’s just your money growing with interest and investment returns, and then that amount growing on top of itself, month after month after month. When you put money away every month, as opposed to whenever you remember or once a year or two, this tool becomes significantly more powerful because there’s more money to grow upon itself. 

Gilliland provided an example: if you were to start with $50 a month for two years, then $100 a month for two years, then $150 a month until retirement, you would save close to $72,000 over that time frame. Assuming a 9% compounded growth rate, you’re looking at $614,000 by age 65. That’s roughly 7.5 times more than the actual amount you saved in that period.

Think about what it could be if you were to double those figures at any point between now and retirement.  

All of these calculations, for right now at least, are purely hypothetical. With 41 years to go, we can’t be sure what inflation and investment return rates will be, if you’d actually be retiring at 65 (or sooner, or later) or what your income needs will actually be. 

“Of course, no one has a crystal ball and it depends on your risk level and what the market does over the next 41 years,” said Tess Zigo, a certified financial planner and partner at Emerge Wealth Strategies. 

There are plenty of retirement calculators available, and they’ll all give you different amounts based on different assumptions — not only inflation and investment return rates, but tax rates, life expectancy, and so on, she said. 

These calculations, however rough, do show you the power of investing. A bank account just won’t give you the same type of return as an investment portfolio would. You do need to be cognizant of what you invest in, though. For someone just starting out, you might want to confer with a financial planner who could assess your goals, time horizons and risk tolerance, or if you’re using an online investment platform like Betterment, the program will create a portfolio for you based on those variables you input. 

Here’s a little more information on how to pick investments for your retirement portfolio. 

Keep in mind, there may be other sources of income for you when you retire as well. Take Social Security for example, which would reduce the amount you need to withdraw from your nest egg, Zigo said. It’s a little too early for the Social Security Administration to have an estimated monthly benefit for you in retirement, but you should still create an account on SSA.gov so that you can verify your work history is correct and check in every once in a while. 

You may also end up working a job that offers a pension (they aren’t quite as popular in the private sector as they used to be, but they’re still around). Or you may end up working a side job in retirement, which would bring in extra cash flow and delay distributions from your retirement savings. If you’re married, your spouse’s savings will also help support you both. 

The point is — the numbers, for right now, are not as important as the habit of saving, the power of financial literacy, as well as some patience and due diligence. You’ve already started, which is probably one of the hardest aspects of the journey to retirement security. And your lifestyle and spending and income — all of it — is going to change, over and over and over again between now and retirement. 

There are a few other things you can do now to help yourself in the future though. 

One: Know the various types of investment vehicles available to you. For example, if your current employer doesn’t have an employer-sponsored retirement account, such as a 401(k), you can use earned income to fund an individual retirement account. If and when you do get a job that offers a 401(k) or something similar, you can contribute to that as well — they sometimes come with perks like employer matches, and those accounts also have higher contribution limits than an IRA. 

There are also two types of IRAs to keep in mind: a traditional, which is funded with pretax dollars, and a Roth IRA, where you pay tax on the money when you put it into the account and then can withdraw the money tax-free after age 59 ½. Roths are a great tool for young investors who are in low tax brackets, because they’ll avoid paying more in taxes at distribution when they could be in a higher tax bracket. 

As for what else you can do right now to support your future retirement security, Zigo suggests focusing on your skill set and finding a job “you excel at and enjoy, where you are appreciated for your uniqueness and can attract top dollar,” she said. “You can only cut so many lattes on your way to financial freedom — the focus should always be on the top line too: how to be the best at what you do (without being miserable) and earn higher salaries in the process so you can save and invest more every year that goes by.” 

As the years go on, keep yourself in check when you start to make more money. From your letter, it sounds like you do deeply care about your retirement security so this likely won’t be a problem, but it is so easy to spend more when you start to earn more. 

“It is good to be counterculture and not spend everything you make,” Benold said.

And lastly, don’t be hard on yourself when unexpected expenses arise or your goals and lifestyle changes. “There will be a lot of different ups and downs on the way,” Benold said. “Having the final goal in mind is good, but the plan will change numerous times on the way.” 

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