Want To Retire With $2 Million In 20 Years? Here's The Exact Salary You Need If You're Investing Just 15%

When planning for retirement, many Americans dream of accumulating a substantial nest egg — like $2 million. Achieving this financial milestone requires strategic planning, realistic goal setting, and a clear understanding of investment returns. So, how much do you need to earn to comfortably reach this milestone? 

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The Ideal Salary for a $2 Million Retirement

To retire with $2 million in 20 years, one of the more realistic approaches involves earning a higher salary while maintaining a consistent savings strategy. For instance, with a salary of $165,000 per year, and saving 15% annually, one would save about $24,750 each year. Assuming an annual return rate of 6%, this plan is well within reach of achieving the $2 million goal by retirement. This rate of return is considered achievable and aligns with historical averages for mixed-asset portfolios.

The Reality for Average Earners   

However, most Americans earn closer to the national average salary of about $60,000. If someone with this income saves 15% annually, they will set aside $9,000 per year. To accumulate $2 million in 20 years with this annual savings, they would need an investment return rate of approximately 21.44%. 

With this income, the rate is highly ambitious and significantly exceeds typical returns from the stock market or mixed-asset investments, which have historically hovered around 6-8%. Such a high return implies very high risks, often associated with speculative investments or ventures.

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What It Means for Average Investors

The substantial difference in required investment returns illustrates the significant challenge faced by average earners striving for a $2 million retirement fund. This highlights the importance of adjusting either retirement expectations & increasing annual earnings, or considering investments with higher potential returns, though these may carry increased risks that might not be suitable for all.

For many, a more feasible approach might involve slightly higher savings rates, longer working years, or adjusting the target retirement fund size. For instance, aiming for a $1 million retirement fund with a $60,000 salary and a 15% savings rate would require a more manageable and realistic return that aligns better with average market conditions.

Planning for Success

A $2 million retirement is a worthy goal, but it requires significant income or aggressive investment strategies. Most people will find success with a combination of:

• Slightly higher savings rates
• Longer working years
• A more adjustable retirement target

Consulting a financial advisor can help you craft a personalized plan that considers your income, risk tolerance, and desired retirement lifestyle. Remember, a secure retirement is achievable with careful planning and realistic goals.

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*This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.

Jeannine Mancini has written about personal finance and investment for the past 13 years in a variety of publications including Zacks, The Nest, and eHow. She is not a licensed financial adviser, and the content herein is for information purposes only and is not, and does not constitute or intend to constitute, investment advice or any investment service. While Mancini believes the information contained herein is reliable and derived from reliable sources, there is no representation, warranty, or undertaking, stated or implied, as to the accuracy or completeness of the information.