Still Time To Save $1 Million?

Published Monday, March 28, 2016 at: 7:00 AM EDT

The Mazzellis are a typical couple. They married young, saved to buy a nice home, and helped put their children through college. But now, Victor and Debra, both 50 years old, have saved only $80,000 for retirement.

Supposing both spouses retire at age 66, when they will have reached full retirement age (FRA) for Social Security benefit purposes, that gives them just 16 years left to sock away enough for retirement. If the couple's goal is to have $1 million saved by then, what will they need to do?

It will be difficult, but not impossible. Victor and Debra still can secure a comfortable retirement by following a few basic strategies:

  • Ramp up retirement plan contributions. If Victor participates in a 401(k) plan he can increase his annual contributions, especially now that he and Debra no longer have to pay the kids' college expenses. If he has been contributing 5% to the plan each year, Victor might double that to 10%, while Debra could do the same. Suppose that the Mazzellis boost their annual contributions from $10,000 to $20,000. If they earn a 7% annual return over the next 16 years, they'll have $578,692 when they turn 66. (This figure is hypothetical and not indicative of any particular investment.).
  • Figure out Social Security benefits. The Social Security Administration (SSA) provides a benefits calculator at It can help you estimate how much you'll receive in retirement at FRA or if you wait longer to apply for benefits. Benefits increase by 8% for each year after FRA until age 70. For example, if Victor is entitled to $25,000 annually at FRA, that would increase to $33,000 if he waits until age 70 to start taking benefits. He'll need to weigh that larger delayed benefit against the $100,000 (4 years x $25,000) that he would get if he starts taking benefits at 66.
  • Work past FRA and invest more. Regardless of whether Victor or Debra delays Social Security benefits, they might decide to work a few extra years. That helps in two ways—by letting them save more and by reducing the length of time their savings must last during retirement. For simplicity, let's say that this strategy provides $250,000 more in retirement savings for the couple by the time they're 70.

Making other changes, such as downsizing to a smaller home, cutting back on luxuries, and possibly moving to a less expensive area will provide additional savings. Without even taking those factors into account, the other strategies can enable Victor and Debra to build a nest egg of $1,008,692 ($80,000 + $578,692 + $100,000 + $250,000).

Bottom line: The $1-million goal isn't a pipe dream for this couple—and it doesn't have to be for you either. But the sooner you get started, the better.

This article was written by a professional financial journalist for Phase 3 Advisory Services, Ltd and is not intended as legal or investment advice.

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