How Hard Is It to Save a Million Dollars?

Achieving Millionaire Status Through Smart Retirement Savings

In this episode of the Retire Early Retire Now podcast, host Hunter Kelly sheds light on the reality and feasibility of saving a million dollars solely through retirement accounts like 401(k)s and IRAs. He introduces his Palm Valley Pathway, a step-by-step framework designed to help high-income earners build wealth and achieve financial independence. The episode delves into the statistical rarity of million-dollar retirement savings, the importance of consistency, combating lifestyle creep, setting realistic financial goals, and the significance of having a structured plan. Hunter also provides actionable scenarios and tips on how to optimize and automate savings to reach financial milestones efficiently.

00:00 Welcome to the Retire Early Retire Now Podcast
01:03 The Reality of Becoming a Millionaire
03:51 Breaking Down the Math of Saving a Million Dollars
06:04 Common Pitfalls and How to Avoid Them
11:05 The Palm Valley Pathway to Financial Success
20:14 Taking Action and Staying Consistent
23:15 Final Thoughts and Encouragement

Check out the Palm Valley Wealth Management Website
PalmValleywm.com

Check us out on
Instagram
LinkedIn
Facebook
Listen to the Podcast Here!
Apple
Spotify

Transcript

0:00

And welcome back to the Retire Early Retire Now podcast. I'm your host, hunter Kelly, certified financial planner and founder of Palm Valley Wealth Management, where we help high income earning families build a life they actually enjoy. And if you're new to this podcast, it's all about simplifying wealth taxes, investing in early retirement planning for people who want more control over their financial life and more freedom over their actual life. Have you ever wondered what an actual process of building wealth looks like? Not what you see on social media with fancy cars and bad tax strategies, but an actual repeatable version that helps you create wealth? That's what I've created at Palm Valley Wealth Management. I call it the Palm Valley Pathway. It's my step-by-step framework that helps families get organized, optimize their money. Set real goals and turn those goals into consistent action. It's the same roadmap I use for all my clients to help them work toward big milestones like becoming a millionaire inside their retirement accounts, which actually ties in perfectly into today's episode because we're tackling a big question that I get a. And a question I pondered myself, How hard is it actually to save a million dollars? And before we get into all the math and mindset and practicality of it, I wanna hit you with some stats that might surprise you. There are roughly 22 million millionaires in the US when you look at total net worth. But when we zoom into just retirement savings, 4 0 1 Ks, IRAs, 4 0 3 Bs, only about 2.5% of Americans ever reach a million dollars. So the idea of becoming a millionaire is. Is everywhere, right? Everyone talks about becoming a millionaire, but the reality of doing it inside your retirement account is actually far more rare than people assume. So today we're gonna tackle, well, how do we get there? why is it easier than it's ever been before? what are the action items that we can use to help us get there? Right? And so before we do that and we jump in today's episode, please take 10 seconds to leave a five star review on your favorite podcasting app, or share this with a friend that wants to become a millionaire. It helps this show reach more people just like you To help people become more financially independent. So let's get into it. People love round numbers. A million dollars feels like a magical threshold. Like if you hit it, you've made it big time, Especially if you're around my age or older, a million dollars used to be the threshold. If you had a million dollars, you were the rich of the rich, maybe not so much anymore. A million dollars doesn't go as far as it used to. Inflation, longevity, lifestyle expectations. The world has changed since the nineties, right? But hitting a million dollars has never been more achievable, for high income earners. here's what the national stats tell us. Nearly 22 million Americans are millionaires in terms of net worth. That includes your home businesses, things of that nature. also IRAs and investment accounts, but very few actually get their through their retirement savings alone. Why? Because the challenge isn't income, it's lifestyle creep, lack of structure, irregular saving, no roadmap, emotional investing. The myth is that you need to have a perfect investment strategy. The reality is that you need consistency, time, and a plan. Let's break down what it takes to actually save a million dollars. But first, here's a stat to set the context. Fidelity recently reported more than 650,000. Americans now have at least a million dollars in their 401k. That's the highest number ever recorded, but it's still well under 2% of all 401k participants, so people are doing it. It's not just happening by accident. Now let's look at the math. What are some scenarios where you yourself can manage to save a million dollars in a 401k? So if you're starting, let's say you're age 30 or you're starting at age 30, you invest a thousand dollars per month, you get an 8% return. The time it would take to get to a million dollars would be about 28 years. So you would be about 58 years old and you would eclipse that million dollar mark. Totally doable. Scenario two, maybe you wait at 10 years, you're age 40, you hit a million dollars by age 60. You would need to save about$2,700 per month, assuming that 8% rate of return. Still very achievable for high income earners, but requires intentionality. Scenario three, maybe you are a supercharged saver, right? Let's say you are a physician, an attorney. You just make a decent amount of money, whatever that may be, and you save, uh, you start maxing out your 401k$23,000 a year. Employer contribution,$8,000 employer match a total of$31,000 a year at this rate. At an 8% rate of return, you would hit a million dollars in about 20 years, even starting in your forties. This is why so many people think they're behind, but they've never done the math. So let's say you've already saved$200,000. You, you feel like you're doing things right. Uh, you don't see the progress that maybe you want. So where are you? Where are you really? So you start with$200,000. Let's say you have a four one K with$200,000 in it, you're saving$2,000 a month. So you're essentially maxing that 401k. You get a 8% return, it would take you about 13 more years to cross that million dollar threshold. So this gives you a point of reference, some context. How long does it actually take to save a million dollars inside of your 401k? Now, if becoming a millionaire was purely about income, we'd have far more than 2.5% of Americans actually reaching a million dollars in their retirement accounts. The math works, markets works, compounding works, the part that doesn't work. Human behavior. Here's what actually derails people. So these are some things that we've talked about in previous episodes. The first being lifestyle creep. As income rises, so does your spending. We've talked about, how we can combat lifestyle creep a lot on this podcast. You can go back and I have a whole episode on it and it's mixed into multiple episodes throughout, this podcast series, right? and As your income increases, you wanna make sure that you're saving and proportionate to your income, right? if you're making a hundred thousand dollars a year and you're saving 20% or$20,000 a year. And your income jumps to$200,000 a year. We want to make sure that we're gonna save accordingly, right? We want to continue saving our 20%, saving$40,000 a year, and then leaving the rest for taxes and lifestyle, right? we wanna make sure that we can combat lifestyle creep, and we'll talk about how we can do that here in just a second. Number two, no real financial structure. This is a big one. Most people don't think about, the future, or they don't, they don't know how to measure. Are we reaching that future or what's important to us? So people don't know how much they save. People, people don't know how much they spend, where it goes or what their goals are, right? the biggest thing, it's just like when you're trying to lose weight, whatever you measure, you'll be able to improve, right? So you're measuring your calories'cause you wanna lose some weight. then you're gonna know, Hey, I'm eating too many calories, or I'm not eating enough calories, or I'm at a good spot where I can lose, an appropriate amount of weight each week. Right? Same with spending. If you're measuring how much you're spending, whether you're spending too much or not, you'll know where you can improve, right? So the more you measure it, the more you can improve on it, right? So the biggest thing, when someone, when a client comes in or a new prospective client comes in and we're starting to onboard. I, I rarely actually ask how much they spend because almost no one knows exactly how much they're spending, right? the biggest question I'll have is, how much are you saving And how much of that is automatically getting deducted from your paycheck, or you're automatically, transferring to a brokerage account or savings account, or your IRA is whatever it may be, and then deduct from there because no one ever really knows how much they're saving. And I've talked about a method before. Let's call it pay yourself first, and then we can go into that, to where we can help them fix their budgeting and things of that nature. understanding where your money's going, having a little bit of financial structure in your life, can go a long way to helping, you build your wealth. And then on top of that, having goals. What are your values? What do you like to do? Spend? Is it spending time with your family? Is it, doing certain hobbies? What are the values giving to your charity or spending more time with your. church, whatever that may be, right? number three, lack of accountability left alone. Humans drift with structure. They thrive. I'm a big believer in structure, right? Even owning my own business, I have to give myself structure so that I know where I want to go day to day or what, what the process looks like to continue to build my business and have a successful business, right? most humans work in that way. So structure is a good thing, and you need to have accountability, whether that's your spouse making you accountable, whether that's a financial advisor making you accountable, whether that's friends making you accountable, whatever that may be, having that accountability or if you're self-disciplined enough, giving yourself that accountability or, a combination of all of those, whatever that may be for you, but having, structure and then staying accountable to that structure or that process. Number four. Emotional investing, buying high, selling, low, fear and greed. destroy compounding. The stats aren't discouraging. They're a wake up call. Most people don't have a money problem. They have a planning or a spending problem. And so it's an, it's not an easy, is a simple fix, but it's not an easy fix. there is a formula that I have created that works, right? and I've dubbed it in the Palm Valley pathway. And it is a formula that can help you reach your financial goals. And we're talking about reaching a million dollars. And really, it's not necessarily about the number. I think it's fun to look at a round number, like a million dollars because it's something that, that most people can, relate to. Hey, I can't wait to be a millionaire, but maybe you need more than a million dollars. Maybe you need less than a million dollars based off your lifestyle, whatever that may be. what I really want you to get outta this podcast. Is more control over our financial life to give us more freedom, to do the things that we want to do with the people that we love. the average 401k balance for an American nearing retirement is somewhere between, 200 and$250,000. Not even close to a million, only about 20 to 25%, of the way there. how. Do you close that gap? You need a system. You need a process in place, not hope. and so that's exactly why I built the Palm Valley pathway. And so what are the steps to that? Well, step one is organize. Step two is optimize. Step three is plan. And then step four is action. Right? And, So the first step, organize the point of getting organized. Whether you're doing that with a financial, whether you're doing that with a financial advisor or you're doing it on your own, is to get clarity. You need clarity on your spending. You need to know how much you're saving. You need to know where that money is from an account. standpoint from an investment standpoint and what your tax situation looks like, especially if you're a high income earner, taxes can be a big deal, and if you can save on taxes, that will accelerate your wealth growth, So most people skip this and they rely on guessing. guessing is the enemy of progress, and let me tell you why I think people skip this step, and it's not probably what you think. People are not skipping it because of math. They're skipping it because of emotion. A lot of people are scared or embarrassed to look under the hood and see where they are, right? Same thing with losing weight. Most people that are overweight and want to change that they understand that it's not necessarily the healthiest thing, to be overweight and they want to make a change, but they're scared or embarrassed about it, right? Maybe they're scared to ask for help, whatever that may be. personally, I was there, right? and they think things are maybe worse than they actually are financially. so they never, or they never, where they've never connected their money on a real why, right? so again, they think things are actually worse than they actually are financially. Or they've never really given their money a why. Like, why am I working so hard? Why did I go through medical school? Why did I start this business? why do I spend all of these hours working? and so organizing, those thoughts, organizing feels like work instead of, purpose. many times I sit down with clients and we go through the initial organizing process and these, and they realize things aren't actually as bad as they thought. There's many a times where, they've actually been saving pretty well. maybe they're a little bit behind, or maybe sometimes they're actually ahead and they just didn't know because they weren't organized. So even if it's messy, that's okay. It's a starting point, right? that's really what the point of getting organized is. This is. Point A. Right? And if you want to make true progress, if you want to continue building wealth to do these things, then you need to know where you are and you need to know point A, because that will start to help you build that plan to get to point B. It's a starting point. It's a point of reference. Just like if you went into the doctor to get blood work, you have a starting point. And if you have a bad reading, well now, maybe your cholesterol's hal, high or triglycerides or high, or blood pressure's bad, whatever it is, right? You have a starting point and that gives you a plan of action, a starting point to go, okay, this is what I need to improve, and what are the things that I can improve that will have the most impact on my situation. So whether that's saving or cutting spending or in increasing my income or maybe doing something small, like switching up some investments, whatever that may be, is a place and time, a place to measure progress and actually see the improvement over time. You cannot optimize what you do not understand the moment someone gets organized. I see anxiety start to drop away and clarity rises. So once you get through this get organized stage, now is the time to start to optimize. This is where I love to live. This is why I do financial planning, right? this is where I can come in, or you, if you're doing it on your own, you can come in, you start to think about the tools that are available. So in this context, we're talking about. Getting to a million dollars. So what are some of the tools that we have available? You have your employer plans, like your 4 0 3 Bs, your, your 4 0 1 Ks. You have your Roth IRAs, your IRAs brokerage accounts, some strategies involved in their tax loss harvesting or doing backdoor roths or, utilizing, strategies with equity comp, if that's something that applies to you, right? When your savings engine is optimized, compounding accelerates, And this is really what we in the biz call, asset location. So just putting the right investments in the right accounts to squeeze the most tax efficiency out of these accounts is possible, right? but before we even get there. the goal should be super simple, right? The KISS method, keep it simple, stupid, right? Uh, calculate the proper savings rate and allocate those dollars to the right buckets. So we wanna make sure, based off our situation, our goals, when we wanna retire, we wanna make sure that we have a proper savings rate, right? And so, in the context of a million dollars, maybe we're just back, we're doing some backend math to figure out, Hey, what do I need to do to get to a million dollars? Or if retirement is the goal, what is the backend math that I need to do to make sure that I can retire at a certain age? Right? But here's what a lot of people get stuck by, and that is paralysis by analysis. They spend so much time trying to figure out and make everything perfect, and they stop making progress. I can do this in my own personal life as well. Right? I know. Sometimes I feel like I know too much. Right? the thing is to just remember to save and invest. That is the heavy lifting. If you're saving and you are investing, you're doing. The heavy lifting and the more you understand your own capacity and how much you can realistically save and how aggressively you can invest, the easier it becomes. And if optimizing all the moving parts feels overwhelming or you're unsure about the right buckets and tax efficiency and all these things that we talked about in other episodes, that's usually a sign that you need to hire a professional. so hiring a financial advisor. The next step is planning, right? So we need to set some real goals, some measurable goals, and make sure that we have a process in place to help us hit those goals. So we need to save X dollars per month, or this is our retirement number, or here is the timeline. And this is also where you set. and so what helps you set these goals are, going back to where you gotta organize and having some clarity and going back to. Your values, your purposes, why are you doing these things? They all need to be written down, so into a plan. I like to do a one page financial plan for all my clients so that they know clearly clear as they, this is why we're doing it, right? This is what we talked about is important to us. This is the lens. That me as a financial advisor is looking at their plan from or for you. This is, you need to be looking through the lens of why are we doing this? And then coming up with strategies to meet those goals, to help you, live out those values and so on and so forth. It's not just floating around in your head. We want to actually document it. And there's so much research on if you write this stuff down, the odds of you, reaching these goals goes up dramatically, right. So from here you set manageable targets that support your goals. And remember, it's all about process, not the number. And again, this, this whole podcast is about meeting a million dollars, but a million dollars doesn't really matter, right? what matters is that you are hitting your savings goal every month or hitting your savings goal every week, right? You're doing the things that you need to do. Maybe you're increasing your income, cutting, spending, whatever those things are in your plan, and if you get caught up. Staring at a million dollars all the time and not doing the day-to-day things that you need to get done. This million dollars can feel overwhelming or unattainable. Or maybe it's not a million dollars for you. Maybe it's 2.5 or 5 million or 10 million because of your lifestyle and your income to meet retirement. But if you focus on the process of saving each week, investing each month. That repeatable system, the big number comes as a byproduct of the consistency of the things that you're doing. Dave Ramsey has done a lot of, research on millionaires And what they have found is that's what these millionaires do. They don't get, they don't have these get rich quick schemes that make them a million dollars quickly, or these businesses that blow up quickly. Yes, there is some of that, but that's 1% of 1%, right? the vast majority of millionaires. Are just good savers. They spend less than they earn. They save that extra money, and they do it over and over and over, and that is the process that they take to become a millionaire. And the more money you make, the more money you save, the faster you're gonna get to that million dollars or faster that you're gonna get to your retirement number. Right. And so the last step of the Palm Valley pathway is action. And that's what we want to do in this podcast is take action on the things that we talk about, and not just listen to this boring content about financial planning. And we wanna put action to some of these steps so that we can, Become more financially independent and free. Right? And so the biggest thing is start to make these things automatic. Repeatable. Be boring, right? Boring is how you become a millionaire. So whatever you have to do, whether that is upping your employer contributions. Or upping your payroll deductible contributions to your 4 0 1 Ks and things so you don't see it. First. Making those savings automatic to your brokerage account, whatever that may be, it's gonna help you get to your number quicker. because it's gonna be repeatable, right? We wanna be consistent and repeatable. We wanna be boring. Boring is how you become a millionaire. Exciting is how you stay broke, right? and so once the system is in motion, your job is to stay out of the way. Let it work. Now, you're gonna want to review this every so often, whether that be quarterly, bi-annually. Or even annually, whatever that is for you, depending on your situation. but this is the outline of how you can become a millionaire inside of your retirement accounts, not just with equity in your home. And so there should be a mindset shift here, right? Motivation comes and goes, systems, keep it going. I like to run a lot and what I've learned running, week after week, day after day, month after month, is that sometimes I am super motivated. I'm excited to go out. And other days like this last couple weeks when it's been super cold, I'm not very motivated. But once you start going. You stay disciplined. You keep doing the things that you should do. Every single day that MO motivation comes and goes. but you're gonna continue reaching your goal because you're doing the process, right? The systems keep going. So the mindset shift looks like this. Automate your savings. Build an identity of I am a saver, right? I am an investor. I'm building wealth, right? I'm not a spender. There's values that I have. And if those things that I'm spending on don't align with those values, then I don't spend on them, right? align your goals with your values. Because so few people do the basics consistently. Doing the basics alone puts you in the top few percent of savers in the entire country. So if you can save your 20% every single year you're in. The top two or 3%, I would imagine, right? Doing that over and over and over is what's going to put you at the top. You don't need perfect timing. You don't need the perfect investment. You don't need, Anything other than good consistency over time. So how hard is it to save a million dollars? It's hard without a plan. It's hard if you wait too long. It's hard if you let lifestyle creep drive the bus. But with structure automation and intentionality for high income earners, It's absolutely achievable, often, much faster than you believe. If you want help running those numbers or building that roadmap, that's where I can come in. I do this every day at Palm Valley Wealth Management. I call it the Palm Valley Pathway. and thanks for listening. If today's episode brought you value, please take 10 seconds to leave a five star review on your favorite podcasting app. Share it with a friend, and I'll see you in the next one. This podcast is for educational purposes only. It's not meant to be investment or financial advice. Please do not make decisions solely based on this podcast alone. Please seek professional help when considering your own situation.