How to save $1 million for retirement

chart glasses nest egg

Saving $1 million has long been a benchmark retirement goal.

It won't enable a lavish lifestyle of mansions and airplanes, but it should keep you comfortable in your golden years, especially when supplemented with Social Security benefits.

If you follow the 4% rule, you would be able to withdraw at least $40,000 a year during retirement and have your nest egg last for 30 years.

It takes discipline and planning, but banking seven figures by the time you're a senior citizen is far from impossible, even on a middle-class income.

Follow our 5 smart moves and you'll have an easier road to reach that goal.

Smart move 1. Start saving when you're young.

The best way to live well when you're old is to save when you're young.

Start saving $405 per month at age 25, earn a 7% return over time and you'll have $1 million by age 65.

But if you wait until you're 30 to start saving, you'll have to put away $585 per month to reach that goal.

"There is tremendous power in starting early," says Bruce Hemler, founder of Wealth Enhancement Group in Chaska, Minn. "You'll earn even more through compounding than if you save more later."

But even if saving several hundred dollars a month now seems impossible, be sure to save something. The easiest way to do it is to make it automatic by having money pulled directly out of your paycheck.

Start by saving enough to maximize your 401(k) match at work (if you have one). Once you meet the match, start putting the excess in a Roth IRA.

Our saving a million dollars calculator will show you how long it will take to reach your goal based on your monthly savings.

How much wealth can you build?

If you start saving at age 25, here's the nest egg you could amass by 65, assuming a 7% annual return.

Monthly contribution Savings at retirement
$400 $994,207
$500 $1,242,758
$600 $1,491,310
$700 $1,739,862
$800 $1,988,413
$900 $2,236,965

Smart move 2. Live below your means.

There are only two ways most people can save more money — earn more or spend less.

It's usually much easier to do the latter.

In the book The Millionaire Next Door, authors Thomas Stanley and William Danco write that people with a net worth of more than $1 million typically get there by living on less than what they earn.

These millionaires are more likely to be living in modest homes with 10-year-old vehicles parked in the driveway.

They establish a comfortable standard of living, then maintain that throughout their career. And they are more likely to save raises, bonuses and windfalls rather than spend them.

Whether you earn $50,000 or $150,000 per year, you'll have little to show for it if you spend as much as you earn.

Get into a habit of trimming your expenses, banking your raises and saving at least 10% of your income.

Smart move 3. Invest.

No matter how much you save, you'll never reach $1 million by stashing it in a savings account.

Stocks are the only investment that can reasonably help you build long-term wealth.

By the time you reach a million bucks, you'll have contributed about half of it. The other half will have come from capital gains, dividends or other returns.

Over the past 40 years, the S&P 500 has delivered an annualized return of 11.14%. That means a dollar invested in 1984 would be worth $23.75 today.

"You invest in the stock market to grow your money and protect it from inflation," says Nicholas Yrizarry, of Nicholas Yrizarry Wealth Management Group in Laguna Beach, Calif. "If you don't at least keep up with inflation, you'll lose about half your money every 18 years."

Start by taking advantage of your 401(k) plan at work.

For most of us, investing in a target date fund is probably the smartest course.

They're low-cost and offer a balanced portfolio of stocks and bonds that will rebalance as you age to reduce your risk.

Simply find the year closest to your retirement age. If you're 35 and want to retire at 65, go with a 2045 fund.

You get a decent diversified portfolio and need to do little more than make regular contributions.

You can learn more about investing as you go. Just start now.

piggybank chalkboardYou want to take control of your life? This is the way to do it. You'll feel great as you see your savings grow and begin to appreciate what financial security is really all about. Follow our 6 smart moves and you'll learn:

How to start saving in your 30s

How to start saving in your 40s

How to start saving in your 50s

Smart move 4. Manage your debt.

If you’re paying a $5,000 credit card balance at 22% APR, you’re throwing away more than $1,000 per year in interest.

You should pay down that debt as quickly as possible, even if you have to stop saving for a year. No investment is going to net you a guaranteed 22% return.

You'll also want to carefully consider the debt you incur going forward.

Most successful millionaires avoid unnecessary debt, especially credit card debt.

"Most people treat credit cards irresponsibly. If you don't have cash in your checking account to cover the charges, don't spend the money," says Dan Neiman, partner and portfolio manager with Neiman Funds, based in Williamsville, N.Y.

Next, minimize your auto purchases.

If you need to finance a vehicle, use the 20/4/10 rule.

It says to put down at least 20% on a vehicle, finance for no more than four years and not let your total costs, including insurance, exceed 10% of your income.

Then there's also student loan debt. You can't change the past if you've already racked up $80,000 in student loans.

But do what you can to look for interest rate reductions or pay them down as quickly as possible.

Smart move 5. Maintain a lifelong commitment.

Saving is something you should do for the rest of your life.

Everyone goes through some hard times. You may get laid off or have a big medical emergency.

"There are going to be times when you can't save anything. Maybe you even have to spend your savings," Wealth Enhancement Group's Hemler says. "But you need to get back on that horse and start saving."

Finally, all isn't lost if you don't manage to bank $1 million.

Even socking away just half that amount will still give you a decent income to supplement Social Security benefits in retirement.

A $500,000 portfolio should still be able to provide you with $20,000 per year.