The first million takes the longest to achieve

[HI Bill]

18, 12, 2

13, 5, 2, 4 (the 4 would have been a 1 if not for spending in ER)

 

[CSdot]

One of the more entertaining threads I have read on this site in a while.

For those reading this who are just starting out, keep in mind that the average reported timeframe for the first $1M seems to be around 20 years, so don't get discouraged.

 

[athena53]

Anyhow, seemed like a lot of well-to-do parents were financing the Money Mag lifestyle for their adult children. And when I was on my co-op building's board, I got to see first hand just how true that was - at least in NYC. As a landlord, I've also seen how true it is - both situations where you get an inside look at where the money is really coming from.

And some of it gets muddled over time. My Ex inherited $300K in 1983. We put $100K down on the house in an expensive area (Bergen County, NJ); the rest pretty much got squandered over the years on nice stuff for him and paying part of the household costs after he became unemployed. I had to cover everything the last 5 years of the marriage after it ran out. But- when we divorced I got $100K (40% of the equity), added a $250K mortgage and sold at a $200K profit 6 years later. Moved to LCOL area, remarried, DH was collecting SS but got $100K out of the equity in his house and we put only about $50K down on the one we bought- the rest went into investments.

So-partly a long-ago inheritance, partly some good breaks on primary home sales, partly sound decisions. Not the kind of things I could have anticipated in a Monte Carlo simulation!

 

[Lorenzo]

For those reading this who are just starting out, keep in mind that the average reported timeframe for the first $1M seems to be around 20 years, so don't get discouraged.

Hmm. Or for those reading this thread who never gave saving for retirement much thought beyond participating in 401(k)s to the extent possible. Beginning at age 22 when just out of college, and over the course of various employment situations--none of which offered a matching contribution or spectacular salary increases--my various 401(k)s and rollover IRAs got me to the first 1M a leisurely 32 or 33 years later. Running some numbers on a 401(k) growth calculator, it looks to me like the number of years to reach 1M that people are reporting here are probably below the norm out there in the wild (that is, non-FIRE people).

 

[Ronstar]

Hmm. Or for those reading this thread who never gave saving for retirement much thought beyond participating in 401(k)s to the extent possible. Beginning at age 22 when just out of college, and over the course of various employment situations--none of which offered a matching contribution or spectacular salary increases--my various 401(k)s and rollover IRAs got me to the first 1M a leisurely 32 or 33 years later. Running some numbers on a 401(k) growth calculator, it looks to me like the number of years to reach 1M that people are reporting here are probably below the norm out there in the wild (that is, non-FIRE people).

I suspect your 32 or 33 years to reach $1M is about the norm for someone who invested solely in a 401k without a matching contribution.

Others here have pointed out that the average poster here got to $1m in 20-22 years. I think hitting $1m that fast would take some investments beyond a 401k, along with max contributions and good company matches for those who had a 401k.

 

[Markola]

+1. The first took us almost exactly 20 years of saving in stock funds in our 403bs, with matches, with higher savings rates than anyone we knew. One must be focused.

 

[Major Tom]

The power of compounding. But also a million becomes a smaller percentage as your total gets bigger. It is 50% of 2 millions but just 10% of 10 millions.

Yep. As you say, it's simple math - and yet we tout the "the first million is the hardest" line as if it's a piece of valuable inside wisdom!

I mean, if you start with $15,625, you have to double it 6 times to get to a million. Getting from there to 2 million only requires that you double it once. After that, the extra millions come quicker and quicker - provided the draw-down isn't too much of a drag on the compounding, of course!

 

[scrinch]

16 years
5
3
3
2
2
2
2
1
2
1

 

[scrinch]

Yep. As you say, it's simple math - and yet we tout the "the first million is the hardest" line as if it's a piece of valuable inside wisdom!

I mean, if you start with $15,625, you have to double it 6 times to get to a million. Getting from there to 2 million only requires that you double it once. After that, the extra millions come quicker and quicker - provided the draw-down isn't too much of a drag on the compounding, of course!

Late in the game the compounding is what leads to additional millions. Initially it is the saving rate that matters more. And that's why the first million is the hardest.

Every year the portfolio grows by the compounding factor plus the savings factor. When the portfolio is small, so is the compounding amount, so the savings factor exerts more control on how fast the total grows. Later, as the portfolio gets bigger, the compounding amount takes over in importance. Early on (NW=$100,000) a 5% ROI gets you $5,000 per year. If you can save $20k per year, you're quintupling your investment-only rate of growth. Later (NW=$4,000,000) your 5% growth yields $200,000 per year which means the next $million comes in five years even if there is no annual savings set aside.

 

[Major Tom]

Yes to everything you said scrinch. I didn't mention the importance of savings in my simplistic post but yes, in the early years, the savings rate is of paramount importance.

It sure is nice when, in later years, you can ease up on the savings rate, eventually stopping altogether, and still make money - and often, lots of it.

 

[Onda]

16 years
5
3
3
2
2
2
2
1
2
1

I find interesting that you retired in 2016. So last 5M came after you retired. What is you allocation and withdrawal strategy?

 

[street]

Late in the game the compounding is what leads to additional millions. Initially it is the saving rate that matters more. And that's why the first million is the hardest.

Every year the portfolio grows by the compounding factor plus the savings factor. When the portfolio is small, so is the compounding amount, so the savings factor exerts more control on how fast the total grows. Later, as the portfolio gets bigger, the compounding amount takes over in importance. Early on (NW=$100,000) a 5% ROI gets you $5,000 per year. If you can save $20k per year, you're quintupling your investment-only rate of growth. Later (NW=$4,000,000) your 5% growth yields $200,000 per year which means the next $million comes in five years even if there is no annual savings set aside.

Yes, compounding has power. I mentioned that also in one of my first posts. You are right that first takes years to get because trying to save that amount with some help from compounding. After that one it doesn't take as much effort to achieve more because of compounding power.

 

[LateToFIRE]

Late in the game the compounding is what leads to additional millions. Initially it is the saving rate that matters more. And that's why the first million is the hardest.

Every year the portfolio grows by the compounding factor plus the savings factor. When the portfolio is small, so is the compounding amount, so the savings factor exerts more control on how fast the total grows. Later, as the portfolio gets bigger, the compounding amount takes over in importance. Early on (NW=$100,000) a 5% ROI gets you $5,000 per year. If you can save $20k per year, you're quintupling your investment-only rate of growth. Later (NW=$4,000,000) your 5% growth yields $200,000 per year which means the next $million comes in five years even if there is no annual savings set aside.

Yes to everything you said scrinch. I didn't mention the importance of savings in my simplistic post but yes, in the early years, the savings rate is of paramount importance.

It sure is nice when, in later years, you can ease up on the savings rate, eventually stopping altogether, and still make money - and often, lots of it.

You two said it better than I tried to earlier. Yes, early on the savings rate matters much more. Later on, the portfolio and/or NW gets carried by compounding. At some point, the savings rate is no longer significant relative to the compounding effect (though spending rate is always relevant).

I think one of the reasons I had originally set such a lofty goal for retirement savings is that while I understood this concept, I still didn't really trust it until after years of observation. Also, my picture is distorted by r.e. transactions and appreciation, so my numbers have been very lumpy.

 

[LateToFIRE]

I suspect your 32 or 33 years to reach $1M is about the norm for someone who invested solely in a 401k without a matching contribution.

Others here have pointed out that the average poster here got to $1m in 20-22 years. I think hitting $1m that fast would take some investments beyond a 401k, along with max contributions and good company matches for those who had a 401k.

I went back and look a look at the 401k from my last job. From start to $1M took almost 16 years. A couple of factors come to mind in terms of the brevity:

1) I was able to start contributing right away
2) There was an employer match, though nothing out of the ordinary, that's contributed 30% of the current balance (according to their statement)
3) During the latter years I was able to make catch-up contributions (over age 50)
4) I always contributed up to the legal max
5) I was heavily equityweighted, something like 90%

 

[Andre1969]

For me, with invested assets at least, my progression was something like this.
12/31/1997: What I consider my start point. At least, that's the first point on my spreadsheet. I had $64 in my Boeing 401k (just started putting into it the last two weeks of 1997). I also had 15 shares of Boeing stock worth about $734. About $1750 my checking account. About $3500 in savings bonds, that my Mom had taken out for me when I was a kid. She also had a bunch more, but I didn't find out about them until 2003 when she gave them to me.

$1M: February 2015 (So about 17 years, 2 months)
$2M: Jan/Feb 2020 (5 years...but considering when I hit this peak, not surprisingly, it didn't last long!)
$3M: February 7, 2024 (about 4 years)

 

[Ronstar]

Something else that might be contributing to the longer time frame to acquire the first $1m - Saving for a down payment for a house.

In my case I started work in 1974 making $3.25/hr. Very small company savings plan where I saved $4k in 7 years.

But I did buy a vacant lot in 1977 with a mortgage. Saved and paid it off. Sold it and along with savings bought a 5 acre lot in 1982. Used this as collateral for my first house in 1984. Didn't start a 401k until 1986.

So for the first 10 years of work, most of my savings went toward my first house. I suspect that most of us here are not taking $ away from investable assets to buy a house in our most recent years, but rather used whatever savings we had for a house down payment in our early working years.

So while compounding explains most of the reason for increasingly shorter periods to acquire additional millions, most of the early years (at least in my case) savings went into a non investable asset.

 

[athena53]

Something else that might be contributing to the longer time frame to acquire the first $1m - Saving for a down payment for a house.

Ah, I remember that- bought a 2-family with a friend when I was 27 and, although we had good incomes, he had almost no savings and we were getting a mortgage with PMI that wouldn't let us borrow more than $75K. It was a real stretch to come up with everything we needed at closing. I remember liquidating my little stock portfolio- it was pretty traumatic. We barely broke even when we sold 3 years later.

Glad those days are behind me.

 

[street]

Something else that might be contributing to the longer time frame to acquire the first $1m - Saving for a down payment for a house.

In my case I started work in 1974 making $3.25/hr. Very small company savings plan where I saved $4k in 7 years.

But I did buy a vacant lot in 1977 with a mortgage. Saved and paid it off. Sold it and along with savings bought a 5 acre lot in 1982. Used this as collateral for my first house in 1984. Didn't start a 401k until 1986.

So for the first 10 years of work, most of my savings went toward my first house. I suspect that most of us here are not taking $ away from investable assets to buy a house in our most recent years, but rather used whatever savings we had for a house down payment in our early working years.

So while compounding explains most of the reason for increasingly shorter periods to acquire additional millions, most of the early years (at least in my case) savings went into a non investable asset.

Yes, that is true and for many of us like you stated.

I started my life time career in 1981. My wage was $3.60 an hour and did start the pension plan at that time and the 401K I believe I started a year later. I also didn't contribute a whole lot because I got married (83) and in 1984, we bought a lot and built our home together. I paid house off in 1986 so than I could start saving with a lot of vigor from that time forward. Those years interest rates were in that 14 to 16% rate, so I wasn't going the pay that for long. The two years of payments I was doing double payments, and that double went to principal only, no interested added to that payment.

I believe a year or so after my career start, I went to $5.50 an hour and got raises every year for the next 36 years. I maxed all programs as soon as I could in my working years.

 

[CRLLS]

I often told people that asked, "We are working on our 2nd million. I had heard that it was easier than the 1st mill. Once we have our 2nd million, we will start working on our 1st."

For us, it was 31,13,4 and hopefully 2 by the end of this year if the finance gods are generous and we don't BTD before then.

We do use the traditional NW (total assets minus debts) and not a MNW (Modified Net Worth) that many here use. I'm not really sure that NW number has done for us other than to give us a feel-good number. Knowing it at least allows me to post in this thread.

 

[Chuckanut]

If the first million didn’t take the longest then I would suspect that the person’s savings and investment plan was not very good. Or, the person was not following the plan very well. Or they hit the lottery, or inherited a ton of money, or perfected cold fusion.

 

[tmitchell]

Wow I think I've been too conservative with my 60/40, but I got a very late start and didn't want to risk not being able to pull the plug.

Not sure where people are "starting" from (i.e. first investment or first paycheck?) but if my first investment was one troy oz of silver at age 11 it took me 37 yrs for the first million, 4 for the second, still waiting on the 3rd but getting close...

Maybe I should bump up my AA!

 

[LateToFIRE]

Wow I think I've been too conservative with my 60/40, but I got a very late start and didn't want to risk not being able to pull the plug.

Not sure where people are "starting" from (i.e. first investment or first paycheck?) but if my first investment was one troy oz of silver at age 11 it took me 37 yrs for the first million, 4 for the second, still waiting on the 3rd but getting close...

Maybe I should bump up my AA!

Nothing wrong with your 60/40, there is no one size fits all answer. My 90% equity AA on the last 401K was balanced by the fact that I had a healthy cash balance, which was also to offset the fact of being levered up on a pile real estate assets.

 

[LateToFIRE]

Something else that might be contributing to the longer time frame to acquire the first $1m - Saving for a down payment for a house.

In my case I started work in 1974 making $3.25/hr. Very small company savings plan where I saved $4k in 7 years.

But I did buy a vacant lot in 1977 with a mortgage. Saved and paid it off. Sold it and along with savings bought a 5 acre lot in 1982. Used this as collateral for my first house in 1984. Didn't start a 401k until 1986.

So for the first 10 years of work, most of my savings went toward my first house. I suspect that most of us here are not taking $ away from investable assets to buy a house in our most recent years, but rather used whatever savings we had for a house down payment in our early working years.

So while compounding explains most of the reason for increasingly shorter periods to acquire additional millions, most of the early years (at least in my case) savings went into a non investable asset.

This was very true for me - early on I prioritized real assets over investible assets, which explains my focus on NW vs portfolio on the question of how long took for 1st $1M. My approach not for everyone, but would say it's certainly paid off over the years. Going forward though, as I unwind the real estate part of the equation, will be far more weighted towards portfolio unless get itchy and go out and buy some more property. Unlikely as just don't want the hassles.

 

[NgineER]

Some great success stories!!

luckydude and Onda >>> very impressive!!!

+1 wowsers!

 

[homestead]

Something else that might be contributing to the longer time frame to acquire the first $1m - Saving for a down payment for a house.

Yes, for us it was paying off our house. Interest rates were high back in those days.