Saving a million dollars will support a pretty eccentric personal lifestyle.
If you wanted to live on just the income for a while, you could expect to make about 6 percent, or $60,000, a year on your million dollars without dipping into the principal.
Life could be sweet -- and it could all happen well before "normal retirement age."
I have bumped some numbers around to illustrate how people in varying circumstances can generate that illusive $1 million sooner and easier than they think.
We'll take three examples: a young couple in their early 30s who, between them, have $30,000 in 401(k) plans. They can reach $1 million in 15 years.
A couple with $100,000 can reach $1 million in 12 years.
A couple with $200,000 today can reach $1 million in 10 years.
Sound fantastic? Check this out: A young couple with two jobs and a combined total of $30,000 in retirement plans today could reach $1 million in 15 years at a cost per month in take-home pay of $1,500. That's less than they are probably making in car payments, registration and insurance on the BMW, the truck and the ski boat right now.
We'll assume that money in mutual funds earns an annual average of 10 percent. Their $30,000 will double every 7.2 years and total $120,000 after doubling twice.
A 401(k) contribution from each of two jobs totaling $27,000 a year will accumulate to $880,000 and cost $18,000 in annual take-home pay.
At least $9,000 of the $27,000 will be paid with money that would otherwise have been owed in state and federal income taxes. Saving and investing $18,000 in annual take-home pay works out to $1,500 a month.
For a couple with $100,000 in retirement plans today, the million comes up a little faster:
In just more than 12 years, both contributing a total of $30,000 per year accumulates to $660,000, and the original $100,000 compounds to about $340,000 for a total of a million.
The tax-deductible $30,000 costs the average two-income couple about $1,625 a month in take-home pay -- perhaps even less if they've otherwise been hit with the alternate minimum tax (AMT).
For a couple with $200,000 already, the million arrives in just 10 years at the $30,000 per year contribution level.
Today's $200,000 more than doubles to $520,000, and the annual $30,000 accumulates to $480,000.
Again, the cost in take-home pay is $1,625 or possibly less.
With all of these couples, we are assuming that both are working and that each member has an opportunity to participate in 401(k) or similar retirement plans with annual contribution levels of up to $15,000 each.
There are variations on the theme as well. For example, each person can borrow up to $50,000 from most retirement plans for any reason without triggering a tax. This provides a $100,000 safety valve if something else came up as an opportunity or need to use the money outside the retirement plan.
If the 10 percent return assumption seems questionable, there are good, balanced funds like Vanguard Wellington that have averaged 12 percent per year for 15 years.
Most balanced funds have a third of their money in bonds, and this fund type typically lost only between 2 percent and 4 percent during the entire down market of the early 2000s.
If we use a 12 percent assumption rather than the more conservative 10 percent, all of these time periods reduce by about one to two years.
These three examples are linear, meaning that cutting all dollar amounts in half will get you to $500,000 in the same time periods. If you can shoot for just the first $500,000 today, the other half will come much faster and easier.
For further inspiration, there's Walter Gutman's classic book, "You Only Have to Get Rich Once."
Go for it.
Think of that $1 million. Think about how fast the last 10 years have gone by. How good would it feel to arrive at $1 million in just 10 more years? Is it worth altering priorities?
And how much of what we spend our money on will we be glad we still own 10 years from now? How will it compare to being within striking distance of $1 million and a life free of financial concerns?