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If you’re in your 30s, you can follow clear, practical steps to build a million-dollar nest egg by retirement. Starting now means you’ll need to save less than if you wait. If you haven’t begun investing, don’t worry—start today and learn how to plan for retirement.
My husband and I faced tight finances early on. I left work for a graduate degree while we lived on one income, then later we lived on a single income again when I became a full-time parent. Still, we saved and invested aggressively through those years, and eventually exceeded our retirement goals. Below are the strategies that made the difference for us.
Begin with your workplace retirement plan
Your employer retirement account—401(k) or 403(b)—is the best place to start. In 2023 the employee contribution limit is $22,500 (plus an extra $7,500 if you’re 50 or older). Contributions to a traditional 401(k) reduce your taxable income now, so you get an immediate tax benefit. For example, someone in the 24% tax bracket who contributes $22,500 saves about $5,400 in taxes right away.
Automatic payroll contributions make saving painless: once the money is withheld, you quickly adjust your spending to the lower take-home pay and stop missing it.
A simple example
At age 32, Dylan earns $85,000 and puts $22,500 a year into his 401(k). That lowers his taxable income to $62,500 and saves him roughly $5,400 in taxes. If his account grows at a conservative 7% annually, after 23 years—by age 55—his 401(k) would be worth about $1.39 million.
If $22,500 a year is too much, smaller contributions still help. For instance, contributing $12,000 per year can still grow to around $1 million in about 30 years. These examples don’t even include employer matching, which can speed progress significantly. If both partners contribute or your employer offers a match (for example 5%), you’ll reach your goal faster.
Pick simple, low-cost investments
You don’t need to overcomplicate investment choices. Two easy options in a 401(k) are target-date funds or a small selection of stock and bond index funds.
– Target-date funds: These are “set-and-forget” choices that automatically shift from more stocks when you’re young to more bonds as you near retirement.
– Index funds: Low-cost index funds track a market index (total market, S&P 500, small caps, etc.). They’re straightforward, diversified, and widely available from firms like Vanguard, Schwab, and iShares.
Fees matter
Pay attention to fees—higher fees can eat a large portion of your returns over time. For example, on a $10,000 investment earning 6% annually over 25 years, different annual management fees lead to very different outcomes: a tiny fee preserves most gains, while a larger fee can cut tens of thousands from your final balance. Always ask about fees or check a fund’s fee information before investing.
Automate savings and make it a habit
Automate contributions to your retirement plan, Roth IRA, and other savings or investment accounts. Set up payroll deferrals or automatic transfers from your checking account. Small amounts saved consistently add up. Once the money leaves your hands automatically, you learn to live on what’s left.
Use behavioral tricks to stay on track
Design your environment to make good choices easier. Just as you might avoid keeping sweets at home when trying to lose weight, remove temptations and automate positive financial behaviors. The book Nudge by Richard Thaler and Cass Sunstein offers many useful ideas for structuring choices to work in your favor.
Control big expenses and curb lifestyle inflation
How you spend on housing, transportation, and food has a major impact on your ability to save. Choose lower-cost options where you can and avoid upgrading every time your income rises. Live below your means and prioritize saving and investing over short-term luxuries.
Pay off high-interest debt
Debt with high interest, like credit card balances, undermines your investing. If you’re paying 18% interest on debt while earning 7% in the market, you’re effectively losing money. Focus on eliminating consumer debt quickly—consolidate student loans if that helps, stop using credit cards if they tempt you, and consider an all-cash approach for discretionary spending. Mortgage debt is different, but consumer debt will sabotage your path to wealth.
Other practical steps
– Start saving as soon as you begin working.
– Favor stock funds when you’re young for growth, then shift to more conservative investments as you near retirement.
– Don’t limit yourself to your 401(k): open a Roth IRA and a taxable investment account for additional tax-advantaged or flexible savings.
– If you prefer professional help, use a fee-only financial advisor or a low-cost robo-advisor.
– Live within a budget and make saving a priority.
If you commit to these habits—automating savings, choosing low-cost investments, controlling debt, and keeping spending in check—you greatly increase the odds of reaching a million dollars by retirement.
