How to build a million dollar retirement if you start investing in 2024

Achieving a million dollar retirement can seem like a daunting goal, especially since the average retirement savings for American families is about $87,000. However, with strategic planning and consistent effort, it is entirely possible.

Below is a summary of the steps you can take to begin your journey to a seven-figure retirement.

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1. Review your net worth

Before you throw money into different accounts, it’s important to peel back the layers of your finances. Start by checking your net worth, which is the sum of all your assets — such as checking accounts, certificates of deposit and investment accounts — minus your liabilities, such as credit card balances and student loan debt.

Once you have a clear picture of where you stand, you can better identify the moves you need to make to increase your net worth. Make it a habit to check your net worth regularly, monthly or quarterly, so you can track how close you are to your millionaire retirement goals.

2. Live below your means

No matter how much money you make, it will never be enough if you are constantly living above your means. By spending less than you earn, you free up more money to save and invest. You also avoid unnecessary debt and high-interest payments, which can quickly erode your wealth-building opportunities.

To better manage your monthly finances, start tracking your income and expenses. Look for opportunities to increase your earnings by acquiring profitable skills, cut your expenses, or both if you want to reach your goals faster.

3. Increase your emergency fund

BlackRock CEO Larry Fink is a fan of emergency funds. In his annual letter to investors, he mentioned that people with emergency savings are 70% more likely to save for the future. If you don’t yet have an emergency fund, consider opening a high-yield savings account where you can regularly add money to build your savings. If you have a steady source of income, three to six months of expenses can be a good start, but if your income is more unpredictable, you may want to aim for a larger emergency fund.

4. Explore your workplace benefits

If you have a job, your workplace benefits can be a great way to jumpstart your retirement goals. For example, if your employer offers a good 401(k) plan with low fees and a matching contribution, you should at least consider contributing the minimum amount required to qualify for the match. If you want to grow your savings quickly, set a goal to max out your account. A workplace 401(k) plan makes it easy to put your savings on autopilot since contributions are deducted from your paycheck before it goes into your account.

Also, your job may give you access to restricted stock units (RSUs), employee stock purchase plans, or stock options that can help you build wealth at work.

5. Invest beyond the workplace

If you don’t have access to a workplace plan or are looking for a companion to your employer-sponsored retirement plan, consider an individual retirement account (IRA). While IRA contribution limits are much lower than 401(k) limits, timing and compounding can work in your favor to add to your portfolio. You’ll also have more flexibility to invest in your favorite assets, such as exchange-traded funds, growth stocks and dividend-paying stocks, which can help you grow your portfolio over time.

For example, let’s say you consistently invest $7,000 in a Roth IRA each year and earn roughly 10% per year, which is in line with historical averages — you could become a millionaire in less than 30 years. However, the return your portfolio currently generates will determine how long it will take to reach your goal. Even if you don’t hit a million dollars in this account alone, it can be a valuable addition to your portfolio to help you get closer to your goals.

Retirement accounts aren’t the only place to invest for retirement. You may also consider other options, such as taxable brokerage accounts. There is no limit to how much you can invest, and you can withdraw your money at any time without penalty. This flexibility can come in handy if you decide to retire before you’re eligible to use your retirement accounts.

Keep in mind that saving $1 million or more for retirement doesn’t require you to be rich or have a six-figure income right now. It’s more about staying on top of your finances and being consistent. Even if you don’t end up building a million dollar retirement, following these steps will position you well for financial security and a comfortable retirement.

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