Everybody wants to be a millionaire, but how do you get there? Is it even possible? A lot of times people think that it’s so far fetched to become a millionaire that they’ll never be able to do it. Well, what we’re going to do is we’re going to break down the numbers to exactly how much you need to invest and what the return needs to be for you to become a millionaire at any age.

We’re going to have three factors that go into this. Factor 1 is what your current age is, because we need to know how long you have to save. Factor 2 is going to be an interest rate, and the interest rate that we use is 7% because the S&P 500 actually averages 9% historically. So 7% is a pretty conservative number if you’re investing in an S&P 500 index over a long period of time. And Factor 3 is what age you want to become a millionaire by, now everyone’s different, so we just took 65 because that’s the typical retirement age for people in the United States. Now we’re going to show you how much you need to save if you’re earning 7% and you want to become a millionaire by age 65.

So we’re going to start with the 20-year-old and if you’re 20 and you want to become a millionaire, it actually is not that hard. You have to contribute $262.15 per month at a 7% interest rate to become a millionaire by age 65. You’re probably thinking, “Well that doesn’t sound that bad.” We’re actually going to get to how good it is when we get into the actual contribution numbers. If you’re 30 and you want to become a millionaire, you have to contribute $552.02 every single month at a 7% interest rate to become a millionaire at age 65. If you’re 40(I think you’re seeing a trend here), it’s $1,227.30 per month to reach $1 million by age 65. Finally, if you’re age 50, $3,136.66 is the amount that you’re going to have to contribute to become a millionaire by age 65. If you’re saying, “Well, you said you’d tell me how to become a millionaire at any age, and I’m age 60,” just use the same formula. If you start at age 60 for over 15 years, you’ll contribute the same amount as you would if you were starting from 50. You’ll become a millionaire by age 75.

Now what’s really interesting are these numbers, you can see that they increase drastically. And you might say, “Yeah, that’s because you’re getting older,” but that’s not the biggest factor. The biggest factor is the amount of compound interest. Albert Einstein jokingly said that compound interest was the most powerful force in the universe. We know the numbers of how much you have to contribute, but let’s see how much you actually contribute over that timeframe and how much is the interest that you’ve earned.

Let’s first start with the 20-year-old. Over that timeframe, if you’re contributing the $262.15 per month, that equals $141,561 over those 45 years. That means that over 85% of what you have in that account will be from the compound interest if it makes 7%. That is incredible. You can see why Einstein called it the most powerful force in the universe.

Now let’s take a look at the 30-year-old. If you contribute the $552.02 per month over that timeframe, you would have contributed $231,848.40. That’s still great, over 76% of what you have when you turn 65 will be from the compound interest. Starting at 40 years old, if you contribute the $1,227 you end up with $368,000 of contribution. Still 63% of that is interest. Lastly, the 50-year-old(this might not sound as exciting since we’ve seen those other numbers)who contribute $3,136 per month until he’s age 65 will end up with over 43% of his million dollars from the compound interest.

So now you know the math behind becoming a millionaire. But what I really want you to learn from this exercise is that pretty much anybody can accomplish this if they set themselves up right and start at a young enough age. The other big thing that you need to know is that you need that compound interest. You need to be able to let your money work for you. If you only contribute the $262 starting from age 20 with no interest on those contributions, you would only have $141,000 by the time you’re 65. You have to make sure that you let your money work for you. If it’s sitting there, it needs to go to work and that’s how you can get to that millionaire status. It’s a lot easier than if you just contributed $1 million by yourself. So make sure that your money is working for you using compound interest.

Securities and advisory services offered through Madison Avenue Securities, LLC, member FINRA SIPC, and a registered investment advisor. Madison Avenue Securities, and Don Anders are not affiliated companies.