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So You Want a Million Bucks

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Note: You can use any financial calculator to do this problem, but if you want the BEST, you can get our 10bii Financial Calculator for iOS, Android, Mac, and Windows!
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THE SCENARIO Last time, I covered a 'flawed' posting I saw on the internet about how people should have $1.3 million to draw on when they retire. The math in the post is a real mess, but if we put that aside, we can legitimately answer the question 'how could I get to $1.3 million at retirement?' Let's do that. The question: If we make an average of $30,000 over 40 years, and save 12.4% of our earnings for that entire span (on a monthly basis), what would our investment return have to be in order for us to end up with $1,300,000? Use End Mode*, even though Begin Mode is more appropriate for this type of question. * If you don't know what this means, don't worry about it - the calculator uses End Mode by default.
THE SOLUTION This one is pretty straightforward. The only thing we don't really know is how much we'd be investing every month. If we make $30,000 per year, that's $30,000 ÷ 12 = $2,500 per month. $2,500 x 12.4% = $310 per month in investment contributions. Now we're ready to start. First things first, make sure the calculator is using 12 Payments per Year. N: 480 (40 years is 40 x 12 = 480 months) I/YR: (This is what I'm trying to find) PV: 0 (I start with nothing) PMT: -310 (I invest $310 every month) FV: 1,300,000 (I want to end up with $1,300,000)

In order for my $310-per-month investment to grow to $1.3 million, it'll have to earn a return of 8.63%.

That's not a negligible return, but it's not outside the realm of possibility. It's pretty remarkable that when I've only invested a total of $310 x 480 = $148,800, my ending balance is more than a million dollars higher. That's the power of compounding returns!

What do you think? Do you want a $1.3 million nest egg when you retire? If so, what are you doing to get it? If not, what number are you aiming for? Let us know in the comments!