Here's how a millionaire can retire, according to finance pros

Building a million-dollar nest egg may seem impossible.

However, accumulating such retirement wealth is within nearly everyone's reach — provided they take certain steps, financial advisors say.

“You might think, 'Well, I have to be a Silicon Valley entrepreneur to get rich,'” says Brad Klontz, a financial psychologist and certified financial planner.

In fact, you can be a fast food worker your whole life and accumulate wealth, said Klontz, a member of CNBC's Financial Advisors Council and CNBC's Global Financial Health Advisory Board.

He said that calculus is simple.

Every time you earn $1, save and invest a percentage for your “financial freedom,” Klontz said.

With this mentality, he said, “you can work almost any job and retire a millionaire.”

Saving $1 million may seem like a “daunting task” but it “may not be as hard as you think,” Karen Wallace, CFP and former director of investor education at Morningstar, wrote in 2021.

The key is to start saving early, perhaps in a 401(k) plan, individual retirement account or taxable brokerage account, experts said. This allows investors to harness the magic of compound interest over decades. In other words, you “allow your investments to do as much of the heavy lifting as possible,” Wallace wrote.

About 79% of American millionaires say their net worth is “self-made,” according to a Northwestern Mutual poll published in September. Only 11% said they inherited their wealth, while 6% got it from an unexpected event such as winning the lottery, according to the survey of 4,588 American adults, which was conducted from January 3 to 17, 2024.

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There were 544,000 Americans with 401(k) balances of more than $1 million as of Sept. 30, according to Fidelity Investments, the largest manager of workplace retirement plans. There were also more than 418,000 IRA millionaires.

In fact, the number of millionaires rose by 9.5%, or 47,000 people, between the second and third quarters of 2024, largely due to stock market gains.

Winnie Sun, a financial advisor, gives an example of the math that links $1 million in wealth to consistent saving.

Let's say a 30-year-old makes $60,000 a year after taxes. She said that if they saved $500 a month — or 10% of their annual income — they would have $1 million by age 70, assuming average market returns of 7%.

This does not take into account financial factors that may boost savings during that period, such as company 401(k) matching, bonuses or raises.

“In 40 years, you will have more than $1 million, and that means nothing else but $500 a month,” Sun, co-founder of Sun Group Wealth Partners, based in Irvine, California, and a member of the Board of Financial Advisors, told CNBC. .

It's also important to avoid debt, which is probably the “biggest gap” for building savings, and try not to increase expenses too much, Sun explained.

Timing is more important than perfection, Sun said.

She recommends starting with a low-cost index fund — such as the S&P 500 Tracker Fund, which diversifies savings across the largest publicly traded U.S. companies — and building from there.

“Even waiting a year can make a big difference in getting to that million-dollar point,” Sun said. “Stop and take action.”

Of course, $1 million for retirement may not be the right amount for everyone.

An oft-cited rule of thumb — known as the 4% rule — suggests that a typical retiree can withdraw about $40,000 a year from a $1 million nest egg in order to safely assume they won't run out of money in retirement. (This annual withdrawal is adjusted annually in proportion to inflation).

For many, this amount will be supplemented by Social Security.

Fidelity suggests a savings goal based on income. For example, at age 67, a worker should aim to save 10 times their annual salary to ensure a comfortable retirement.

Ideally, families aim to save 15% to 20% of their income, Sun said. This is the rule of thumb that financial planners often cite.

How much wealth you want — and how quickly you want to get rich — will determine the percentage, Klontz said.

He personally aims for a 30% savings rate, but knows people who have achieved closer to 90%. Saving such large portions of one's income is a common thread of the so-called FIRE movement, which stands for Financial Independence, Retire Early.

How do they do it?

“They're not moving out of their parents' house, they're cutting back on everything, they're not buying new clothes, they're taking the bus, they're shaving their heads instead of paying for haircuts,” Klontz said. “There are all kinds of hacks you can do if you want to get there faster.”

Of course, there is tension here for people who want to enjoy life today and save for tomorrow.

“We weren't supposed to just survive and save money,” Son said. “There has to be a good quality of life and that happy medium.”

One strategy is to allocate 20% of household expenses toward the thing or things that are most important to you — perhaps big vacations, luxury cars, or the latest technology, Sun said.

Make some concessions — for example, “scrim and save” — on the other 80% of household costs, she said. This helps savers feel like they're not diminishing their quality of life, she said.