I once heard someone say that earning his first $10,000 was much more difficult than earning his last $1,000,000. It may not seem to make a lot of sense, but when you understand compounding interest it makes more sense. And the end result can be even more amplified if you use leverage to your advantage.
Here are a few charts that showcase how many years it takes to reach each $1 million threshold given that you regularly invest and earn a decent rate of return.
To go from $0 to $1 million:
| Monthly Contribution |
8% Return | 9% Return | 10% Return | 11% Return |
|---|---|---|---|---|
| $100 | 52.9 years | 48.3 years | 44.5 years | 41.4 years |
| $250 | 41.6 | 38.3 | 35.5 | 33.1 |
| $500 | 33.4 | 30.9 | 28.8 | 27.0 |
| $1,000 | 25.5 | 23.9 | 22.4 | 21.2 |
| $1,291.66 | 22.8 | 21.4 | 20.2 | 19 |
To go from $1 million to $2 million:
| Monthly Contribution |
8% Return | 9% Return | 10% Return | 11% Return |
|---|---|---|---|---|
| $100 | 8.6 years | 7.7 years | 6.9 years | 6.3 years |
| $250 | 8.5 | 7.5 | 6.8 | 6.2 |
| $500 | 8.2 | 7.4 | 6.7 | 6.1 |
| $1,000 | 7.8 | 7.1 | 6.4 | 5.9 |
| $1,291.66 | 7.6 | 6.9 | 6.3 | 5.7 |
To go from $2 million to $3 million:
| Monthly Contribution |
8% Return | 9% Return | 10% Return | 11% Return |
|---|---|---|---|---|
| $100 | 5.1 years | 4.5 years | 4.1 years | 3.7 years |
| $250 | 5.0 | 4.5 | 4.0 | 3.7 |
| $500 | 4.9 | 4.4 | 4.0 | 3.6 |
| $1,000 | 4.8 | 4.3 | 3.9 | 3.5 |
| $1,291.66 | 4.7 | 4.2 | 3.8 | 3.5 |
That $1,291.66 number didn’t come out of thin air — it represents the current maximum monthly contributions available in a 401(k) or 403(b) account for most people. What these charts mean is that you can go from $0 to $3 million in somewhere between 28 and 35 years with a bit of determination to take advantage of the opportunities you have available. Most of that time is spent getting to that first million. Once you hit that milestone, compounding really takes over to help you reach your ultimate goal.
Source: Fool.com
Excellent illustration. The following millions get easier because the power of compounded growth is at work!
The sad part is that inflation makes that million not be worth as much, but the time you acquire it. And in a 401k you’ll have to pay income tax on it as well.
thanks for that. very encouraging! 1st million is def. the hardest.
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