Can You Save $2 Million for Retirement? Here's How to Find Out

A $2 million nest egg would set you up for a good amount of financial security as a retiree.

If you follow the 4% rule, which many experts believe helps you avoid draining your accounts too soon, having $2 million in an IRA at a brokerage firm or in a 401(k) could provide you with $80,000 in annual retirement income for 30 years. When combined with Social Security, you'd have the funds you need to enjoy your later years.

Saving $2 million can be a big challenge, though. The question is whether it's possible. Here's how to find out.

How to determine if $2 million in savings is within reach

The easiest way to tell if saving $2 million for retirement is something you can do is to use an online calculator to break this big goal down into a small one. Investor.gov has a savings goal calculator you can use that will tell you exactly how much to invest each month to hit any savings target.

Use the calculator to specify how many years you have left until retirement and the expected returns you'll earn. The calculator will tell you how much to save each month. Assume around a 10% average annual return if you plan to invest in an S&P 500 index fund, as that's the return on investment (ROI) this financial index has returned over the long haul.

You'll need to do the math specific to you because your age will affect how much you must save. For example, the table below shows what you'd need to invest monthly if you got started at different times in your life, assuming a 10% average ROI and a planned retirement date of 67 (full retirement age for Social Security for anyone born in 1960 or beyond).

Can you hit your savings target?

As you can see, you need to save a lot less if you start investing early. Of course, when you're young, you may not make a lot of money -- so is it possible to hit these targets even when you do get a head start?

Your income is going to determine that. For a typical 25- to 34-year-old, the Bureau of Labor Statistics says median weekly earnings were $1,103 as of the second quarter of 2024. With an annual income of around $57,356, saving $300 a month or $3,600 a year is absolutely within reach. In fact, it's just 6% of your income, when you should aim to save at least 10% to 15%.

Of course, your income may be below the median. Or, you may be starting late. Say you're a little older and need to contribute that $828 a month, for example. That's $10,056 per year.

However, you can't forget factors like your employer 401(k) match (if you qualify) and tax breaks for retirement savings. Both reduce the amount you personally must invest, making it even easier to hit your target.

Let's say you need to save $10,056 per year. If you make $50,000 and your employer matches contributions up to 3% of your salary, you'd get an extra $1,500 if you invested at least that much in your 401(k). So, you'd need to personally invest just $8,556.

Since 401(k) and IRA contributions are made with pre-tax dollars, you could claim tax breaks that would save you as much as $1,882.32 a year for an $8,556 contribution (if you're in the 22% tax bracket). So, your take-home income would go down by just $6,673.68 per year. Not too bad to end up with $2 million.

The key is to save as early as possible and take advantage of the help available, so you can retire as a multi-millionaire.