A $1 Million retirement fund

Source: A $1 Million Retirement Fund - How to Get There From Here By JONATHAN CLEMENTS

Goal

Let's say, in addition to Social Security, you've determined that you will need $45,000 annually from your retirement fund when you retired.

To generate that $45,000 annually, you will need a $1 million portfolio in your retirement fund (let's use a 4.5% annual portfolio-withdrawal rate).

You may wonder how you will ever accumulate enough money to retire?

First few steps

1) Always save 10$ to 15% of your pretax income every year.

2) Ensure your diversified portfolio earn the annual return of 6% - 8% (2 x rate of inflation) or more.

3) Aim to accumulate savings that equal to two times your annual income as soon as possible.

The milestone of 2 x income is when the biggest driver of your portfolio's growth is investment earnings, not the actual dollars that you're saving.

Once you hit that milestone, the financial wind will be on your back; and reaching your $1 million savings goal should be a breeze!

It may take people 12 to 15 years. But if you're close to the milestone of 2 x pay by your early 40s, you're in pretty good shape.