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How to Go From Zero to Millionaire in 25 Years

When you were a kid, a million dollars seemed like a milestone reserved just for rich people. But these days, it’s clear: If you want a dream retirement, you need a seven-figure nest egg.

That can be a daunting task if you’re 40 with a big fat zero in your retirement account. It’s much easier to bury your head in the sand and pretend the retirement fairy will come through in the end.

We hate to break it to you, but pixie dust won’t work magic for your golden years.

The good news is you don’t need magic to enjoy a big, beautiful future. Build it on your own with these three steps.

1. Grab Hold of a Million-Dollar Opportunity Today

Did you know you’re heading into your best earning years? According to the Census Bureau’s 2017 report on median earnings by age, the typical household income peaks at over $77,000 between ages 45 and 54.1


How much will you need for retirement? Find out with this free tool!

If ever there were a time to go all in with your retirement savings, it’s now! Just make sure you’ve finished the baby steps that precede investment. That means you’ve saved three to six months of expenses in your emergency fund (Baby Steps 1 and 3) and you’re out of debt (Baby Step 2). With a little intensity, this can often be done in two or three years, depending on the amount of debt and savings you have. You may already be halfway there!

Taking these steps in the right order means you’ll have more of your best wealth-building tool—your income—to work with.

So what does it take to rack up a cool million by retirement?

Once you’re out of debt and have that emergency fund in place, you’re ready to begin investing in the future. This is where the fun of watching your money grow really begins. When it comes to annual retirement savings, 15% of your gross income is the gold standard. Why not more—or less?

  • If you save less than 15%, you’re running the risk of coming up short in retirement because of things like inflation and rising health-care costs.

  • Going above 15% could prevent you from devoting enough of your income toward other key goals like paying off your home mortgage early or funding college.

  • Saving 15% avoids both of those problems and takes the best advantage of compound growth over time, allowing you to hit a million or more by the end of your career.

The best place to start is with your workplace 401(k). According to research from Ramsey Solutions, most millionaires we surveyed started here when building their nest egg—and you should too.

Invest in your 401(k) up to the match if your company offers one, then put the remaining retirement savings in a Roth IRA until you max it out ($5,500 per year if you’re under 50, or $6,500 if you’re over). Then return to your 401(k) for the rest until you get to 15%. Does your company offer a Roth 401(k)? Even better—you can put the entire 15% there, assuming you have good mutual fund options in your company plan. (Your financial advisor can help you in this area.)

Invest in good growth stock mutual funds with a strong track record, and $800 a month could land you $1 to 1.4 million after 25 years. Not bad for a midlife start at saving!

But here’s the deal: Procrastination will cost you. If you wait even five years to begin saving, you’d have to invest an extra $500 a month to hit your million-dollar goal. Even then, your potential shrinks to $980,000 to 1.2 million.

2. Make the Most of Job Changes

You’ve still got a lot of working years ahead of you. And odds are, you’ll change jobs at least once before you retire. When you do, you’ll have a decision to make: cash out your 401(k), leave it where it is, or roll it over into an individual retirement account (IRA). So, what’s the right choice?

Let’s say you have $25,000 in your 401(k) when you leave your job and decide to use that money to pay cash for a car. At a 25% tax rate, you’d pocket $16,250. But you’d lose $8,750 from taxes and penalties. Not only that, but you’re losing $270,000 in potential growth over 25 years. Nothing is worth that kind of loss!

What if you leave your old 401(k) right where it is? Many 401(k) plans charge higher fees, so without an employer match, it may not be worth your while. For example, a 1% difference in fees could reduce your nest egg by nearly $50,000 if you let a $25,000 balance collect dust in an old 401(k) for the next 25 years.

That’s why it’s best to roll your 401(k) over into an IRA anytime you change jobs. If you request a direct rollover, you won’t be charged taxes and penalties for an early withdrawal. Your old 401(k) provider will simply write a check payable to the new IRA provider. From there, you can choose the funds you want to invest in.

3. Don’t Wing It

In 2019, Charles Schwab published a survey about how Americans define and manage their wealth. The report showed some startling statistics: Only 28% of those surveyed have a financial plan in writing!2 The study also showed that of those without a financial plan, 46% don't think they have enough money to make a plan. It’s no wonder that more than a third of people aren’t confident about achieving their financial goals, and only one in five are very confident!

Look, this is your future we are talking about! You can’t throw caution to the wind and hope it all works out by the time you retire. It’s time to get real with your goals. Start by dreaming with your spouse and putting your future hopes on paper.

Does your workplace offer financial wellness or any kind of retirement education? If so, take advantage of it! Financial wellness is becoming a key benefit in most HR voluntary benefit platforms. Businesses are learning the value of educating employees on budgeting, saving, retirement and overall wealth-building—and you should take full advantage of it! If you’re interested in learning about how to bring Financial Wellness to your company, check out SmartDollar, an online-based financial wellness benefit that’s flexible and scalable for businesses of all sizes.

Find an Investing Pro

Remember, retirement isn’t an age; it’s a financial number. With the right plan, you can still make progress toward your financial goals for the future.

Find a SmartVestor pro in your area today!

Want to learn more? Dave's new book, Baby Steps Millionaires, will show you the proven path that millions of Americans have taken to become millionaires--and how you can become one too! Pre-order your copy today to learn how to bust through the barriers preventing you from becoming a millionaire.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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