How Saving Just $10 A Day Can Turn Into Over $1 Million For Retirement

The idea of saving for retirement can seem daunting in an era of economic uncertainty. However, there is a road to financial stability – and it starts with $10 per day.

An analysis issued this week by CNBC’s Make It series suggests that a modest $10 daily contribution could grow into a seven-figure sum by retirement age, given the right conditions and an early start.

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“Starting out with smaller amounts is always the winner because you can always invest more later, too,” James Royal, principal investing and wealth management writer at Bankrate, told CNBC. That approach, he argues, can make the savings process less overwhelming and more sustainable over time.

The math is compelling; according to CNBC’s calculations, if a 21-year-old began setting aside roughly $10 per day ($70 per week) in a retirement investment account earning a 7% annual return, it could grow to just over $1 million by age 65.

The strategy’s power comes from the time given for investments to grow. The report said the $70 weekly contribution starting at age 25 would grow to about $803,588 by retirement while starting at age 30 would yield over $550,000.

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CNBC said that even with a more conservative 5% annual return, that $10 daily contribution from age 21 could still grow to over $585,000 by retirement. On the other hand, in a more bullish 9% return scenario, the same savings could balloon to over $2 million.

When it comes to retirement savings, the report noted that time is often more valuable than money. The earlier a person starts the more opportunity for compound interest to work its magic.

For those without access to employer-sponsored 401(k) plans, a Roth Individual Retirement Account (IRA) can be an attractive alternative. “That’s the perfect setup for young workers who expect to be earning more and paying higher tax rates in the future,” Royal said to CNBC.

It’s worth noting that the projections don’t account for life’s unpredictabilities – job changes, market volatility, or personal financial crises. They also assume a static contribution amount, whereas, in reality, many individuals increase their savings rate as their income grows.

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Financial advisors like Fidelity often recommend aiming for a savings rate of 15% of income, including any employer match. But that target can seem out of reach for many, especially those just starting their careers. The $10-a-day approach offers a more accessible entry point.

Though, as with any long-term financial strategy, consistency is key. Even in small amounts, regular saving can create a foundation for financial stability that grows over time.

At a time when pensions are increasingly rare and the future of Social Security remains uncertain, taking control of retirement savings can prove critical in the future.

For a generation grappling with student debt, rising housing costs, and a changing job market, the savings approach suggests that financial security in retirement is achievable for anyone willing to start small and stay consistent.

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Aj Fabino is an Economy & Finance journalist. With experience covering complex financial topics and engaging with high-profile individuals and companies, Aj brings a unique perspective to his writing. He has a Bachelor of Science in Business Administration from Northern Illinois University. Aj’s articles are for informational purposes only and do not constitute investment advice or any investment service.