It’s Easier to Become a Millionaire than you Think!

Millennials, It’s Easy to Become a Millionaire.

I just read an article on marketwatch with the title “Majority of Millennials doubt they become millionaires.” This upsets me because it means two things 1) People aren’t willing to look at the long term anymore – they want everything now. 2) People just don’t know how to do math anymore. So, to respond to these two points, we are going to go ahead and do the math for my fellow Millennials.

Establishing Some Variables

I’m going to take my own definition of millennials as people who just graduated from University at 22.
The average new college grad makes $50,556 annually.
The average cost of living for a single adult with no children is $28,474.
On average you’ll return roughly 10% on your investments annually.
Retirement age is 65.
We assume you invest the full amount into your IRA of $5000/year in order to take the tax benefit.

Calculating Doubling Periods

When you invest in the markets for your retirement you want to base your decisions off of the potential doubling periods your money has. There are multiple complicated ways to figure out exactly how long it will take your money to double, but in the interest of simplicity we are going to use the rule of 72. Basically, the rule of 72 is as follows

Years for Money to Double = 72/Interest Rate

Therefore, if you have a 10% annual interest rate it will take your money 7.2 years to double. This isn’t exact, but it is close enough for our purposes.

How Much Would you Have if you only invested Once?

So, what happens if you only invest once and forget about the money for the rest of your life until you retire?

That initial investment of $5,000 grew tax free over the next 43 years and became $320,000. As a single individual you are making roughly double what your expenses are which means you should be able to easily put away the $5,000. Not only that, but that $5,000 is a tax cut on your income that year.

What happens if you put the $5,000 every year until you retire?


This is a much longer spreadsheet, but the information is the same. Nothing has changed. The only thing you are doing is putting $5000/year into your retirement account. Over the 43 years your put a total of $220,000 into your retirement account and you walk away with an account value of over $3,000,000 when you turn 65. You did absolutely nothing special to become a multi-millionaire. You simply existed and were disciplined in your saving.

What about Inflation?

Inflation is a huge part of the economy, averaging a whopping 3% annually that you lose when you keep your money in cash. This article would not be complete if we didn’t include a projection that includes inflation.

As you can see, over 40 years, that 3% annual inflation rate drops your final number significantly. However, you are still a millionaire at retirement. For fun, what happens if you just put all of your money into a savings account where the average annualized return is .02% before inflation?

You would actually lose roughly $100,000 if you simply put your money into a savings account. Moral of the story, invest your money.

Final Thoughts

The attitude that you will never become X is extremely harmful to you as a person. Not having a long term goal – like being a millionaire by the time you retire, will basically ensure that you spend every dime you make and will end up working until the day you die. How about, instead of complaining as a generation we take the steps to become the first financially literate generation and retire comfortably at the age we are supposed to retire? It’s just simple math and a waiting game. Delayed gratification is the key.




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