Becoming a Millionaire By Investing

In the book, The Millionaire Next Door, one of the lines that will always stand out to me is that how many of our friends and neighbors are secretly millionaires. This is because many of them have built up some sort of retirement savings plus they’ve gotten to the point where they’ve paid off almost all of their mortgage, if not the entire thing. The combination of their house and their savings are enough to push some people past the million dollar net worth line. While they might not live lavish lifestyles, they are technically millionaires! Today I will mathematically show you that becoming a millionaire by investing and saving is very possible in just 20 years!

Becoming a Millionaire by Investing

Some might say that 20 years is a long time! But let’s pretend that you just graduated at the age of 22 and started your first full time job. If you save for 20 years, there is a chance you could become a millionaire by investing by the age 42. This might not be retirement age yet depending on where you live. But if become am millionaire by 42, chances are, you’re well on your way towards early retirement. You could possibly retire by 50 at the latest by that time.

In the US, we have two types of popular accounts to save for retirement:

These accounts both have limits as to how much money you can put into these accounts each year.

If you’re able to earn and save enough money so that you can max out the limits on these two accounts every year, then you may very likely become a millionaire by investing after 20 years.

Maxing Out Your Retirement Accounts Every Year

To illustrate, let’s pretend that you contribute the maximum limit to each of your retirement accounts every year. Additionally, we’re going to assume an average 8% growth rate in the stock market every year. This 8% comes from taking the average of the stock market returns over the last 100 years.

becoming a millionaire by investing 401k
The result of maxing out your 401(K) every year from 1999 – 2019


becoming a millionaire by investing ira
The result of maxing out your IRA every year from 1999 – 2019

At the end of 20 years, your total combined accounts will be nearly a million.

becoming a millionaire by investing
Combined values of both retirement accounts


As you can see, if you contribute into your retirement accounts for 20 years, it’s possible you can become a millionaire by investing. Of course this is very hard to do so. Maxing out your retirement accounts every year require a huge cut to your disposable income. So this inherently works better for those who are already making a high income. Additionally, it will be difficult if you are also planning for a wife, kids, marriage, and a house. This is very likely the case when you’re in your 20s.

Additionally, your 20s is when you probably want to have fun since you finally have a job and income.

Therefore, if you do end up pushing back your savings a little bit, it’s still possible to become a millionaire by investing before 30 years. Even if that happens, you can still retire well before your 60s if you are efficient with your money.

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14 thoughts on “Becoming a Millionaire By Investing”

  1. My wife and I have both been able to max out our 401k’s for the past ten years. We are both around 40 and are fortunately on our way! The only thing I really worry about is inflation. How much will $1 million be able to buy when we retire? Only time will tell.

  2. When I look at these charts it seems so easy to become wealthy but somewhere there is a disconnect with the younger generation. When you get your first job all you’re thinking about is the fact that you have a real paycheck. You can’t even begin to think of retirement let alone taking money out of your check but it is such a necessity! I am going to share this with my 19-year-old to give her perspective on what she should begin to start thinking about.

  3. great charts, great visuals and yes you are right. The earlier you start the better it is to get the compound working for you. Also to invest monthly from your paycheck so you get the dollar cost averaging. Thanks for a great write up and for the millennial generation to see this.

  4. Unfortunately, due to student loans, many people can’t max out their 401ks. However, it’s never too late to start investing, and it’s easiest to do so by direct deposit. If you automate your savings, you won’t really miss it.

  5. Wow this is such an informative post. I’ve always known that saving for the future is so important but after seeing your charts I realize what can actually be accomplished if you really focus on your savings! I am going to show this post to my husband and start making a solid plan for our savings account!

  6. I have seen this type of chart work when we started a $5K challenge for summer vacation at the beginning of the year.
    I am in a good place regarding my retirement plan, and I will keep this to share with nieces and nephews graduating soon.

  7. Saving in the amounts you chart here require a lot of vision and commitment. Younger generations can’t see very far beyond their paychecks, but if they are educated on the importance of saving for their future, they have so much potential to live a very good retirement… and early, too, if they want. Even if they don’t max out their savings in those first years, they will still be far ahead of the game if they at least start. Very informative.

    • Great advice, Nero! I didn’t invest when I was younger and regret that. I’m in a good place financially by saving money every month, but I’d like to be able to do more. Investing sounds like a good way to increase my income. I always appreciate your blog because it’s easy to understand and put into practice.

  8. Extremely helpful insights into investment strategies. It is so important to start investing when you’re young as it gives you the flexibility to try out different investment products without the pressure of having to make quick money, for major life decisions.

  9. It’s so very important to keep assessing your net worth keeping the inflation index in mind, especially in developing countries like ours. And keep investing. Great reminder and insights.

  10. It’s all about delayed gratification. Some of the young people my age (I’m 24) live in an instant gratification bubble or have a lot of debt from credit cards, student loans, etc… there is a shift towards being more financially stable though


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