Your Life

How to make an extra $1 million before you retire

- February 2, 2022 7 MIN READ
Extra $1 million dollars for retirement

There’s not a person among us who wouldn’t fancy an extra $1 million when it’s time to retire. Even better, it’s actually pretty easy to find it.

By Ben Ford

Do you know how much money you’ll have to live on when you retire? Do you know how much you’ll need? Do you care?

Newsflash: You absolutely should.

A figure of A$1m is typically bandied around as being the amount you’ll need in your pension pot to afford to retire in the style to which you’ve become accustomed.

However, this number is much-debated, with some experts judging the amount needed to be closer to $2m. They reason that the time-resistant effects of inflation will render $1m in today’s money far less meaningful in 20 years time.

To the uninitiated and those without a PhD in Personal Finance, this can seem really daunting and with good reason; it’s freaking confusing.

If you fit into this category, then I’m going to help you out – BIG TIME. I’m going to tell you exactly how to make $1 million ON TOP of your current pension plans.


By simply laying out the strategies that people far smarter than you and I have developed, and condensing them into a single resource that breaks down, step-by-step, the things you need to fast-track you to a more enjoyable and stress-free retirement.

This isn’t a get-rich-quick scheme, I won’t be identifying any unicorns for you to invest in. There’s no advice about how to start a business and then sell it for millions.

It’s much more prosaic than that. But therein lies the beauty; because it’s so simple, literally anyone can do it and reap the rewards.

[MASSIVE DISCLAIMER: I’m not a financial adviser, so if you decide to act on any of these tips, you’re doing so at your own risk. I’ll let you know where I’m involved though.]

The absolute key to success here is taking action. Thinking about the future is scary and saving for the future is boring, right? That used to be how I looked at it.

I’m now challenging you to change that mindset and think about investing for the future as the most exciting thing in your life. Or one of them, at least.

1. Compound your interest

 Albert Einstein called it the 8th Wonder of the World. Compounding your gains will be the single most important factor in making an extra $1 million before you retire.

Compounding simply means reinvesting the interest or dividends that an investment pays into more of the same investment. For example, if your bank pays you 10 per cent interest on $1,000, at the end of year 1 you’ll have $1,100. If you let the interest compound at the same rate, at the end of year 2 you’ll have $1,210 (which is your $1,100 + 10 per cent (or $110). Do this for long enough and you have a tidy sum.

For example, a $5,000 initial investment has been left for 25 years and – assuming a 7 per cent annual growth rate – has grown into $27,137 at the end of the term, without you doing a single thing except be patient.

Pretty neat, huh? That’s compound interest doing its thing.

But wait, it gets better. Read on…


2. Automate monthly savings

You’re probably thinking: okay, cute, turning five grand into 27 large is pretty cool. But that’s not going to help me retire. In fact, that will barely cover the cost of the stair-lift that I’ll need to have installed in my house, if I’ve not been shipped off to a retirement home by then.

I hear you.

So here’s where we’re going to add the secret sauce. And fast-track the hell out of this bitch.

By adding regular monthly savings to our money machine, we can supercharge the growth and put ourselves well on the way to that extra $1 million.

I’m taking the same starting point – a $5,000 initial investment – but this time we’re going to thrown in a regular monthly contribution of $500 as well. Nothing else. Just $500 per month.

See what happens:

Not bad, huh? Instead of the $27k return at the end of 25 years, we now have a pretty chunky $433k – close to half a million dollars.

Why $500 as a monthly investment and why automate it?

$500 is an arbitrary figure. It depends on your salary and, up to a point, what you can afford.

By automating it so it leaves your account on the same day each month, you’re baking it into your personal finance workflow so that after a while, you don’t even notice it going out.

Jim Rohn talks about a 70-10-10-10 rule of thumb when it comes to directing your take-home pay, and it’s a beautifully simple model.

70 per cent is for living expenses. He then allocates 10 per cent each to investing in your future, in yourself and then charity. I like this model because its simple and covers all bases.

If your net salary is $6,000 per month, then $500 per month should be a pretty conservative effort.

Where should I invest?

This varies, but if you’re under 40, then a good answer is the share market. Why?

Because you want to become an ‘owner’ of companies rather than just a consumer. Apple gadgets are cool and fun, but it’s Apple shares that will help you retire.

But don’t think you can beat the market; you won’t.

Sure, you can swagger around telling everyone about doubling your money on this-or-that red-hot stock, but you’ll be keeping quiet about the other three you lost out on.

Professional fund managers – the people who manage money at their nine-to-five – rarely make consistent long-term gains. If you find one that does, stick with them.

Instead, buy the ‘index’. This is an investment fund that tracks the performance of the stock market or ‘index’ it is invested in. Index funds are so powerful that Warren Buffet said this about his will and where his assets should be invested for his wife after his death:

“My advice to the trustee could not be more simple: Put 10 per cent of the cash in short-term government bonds and 90 per cent in a very low-cost S&P 500 index fund. I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.”

You can read the full article here.

Index-funds are what’s known as ‘passive’ investments. Because they simply ‘track’ the index, they don’t require expensive investment managers to run the funds, which means less of your gains are eaten up by fees and charges.

AMOUNT MADE: $433,195

3. Watch your fees and charges

 Hot on the heels of Tip #2 is this beauty.

If your investment is earning 7 per cent but your investment manager is taking 3 per cent, then you’re down to a 4 per cent net annual return. That kind of sucks.

But if you invest in an Index Fund that costs 1 per cent or less, then you’re going to hit the extra $1 million mark a lot sooner. Take a look at this.

A funds manager charging you 3 per cent pa delivers the same investment return as your low-cost index fund charging 1 per cent, yet the total value of the investment at the end couldn’t be more different.

We’re talking $500k versus $280k. That’s the power of compounded charges, but for no increase in performance.

So, you’re actually paying $220k in additional charges ON TOP of an underperformance in growth. That’s CRAZY.

You’re paying someone a lot of money ($220k) to mismanage your money. That has to be the definition of insanity, right?

How do you avoid this?
  1. Invest in low-cost index-linked funds.
  2. Check the fees on your superannuation or pension funds and see if the performance is worthy of the fees.

AMOUNT MADE: $220,000 (at least)

4. Invest in yourself

Jim Rohn was a farm boy from Idaho who became one of the world’s greatest personal development gurus and a mentor to Tony Robbins. A lot of the advice in this post comes from Robbin’s book Money – Master The Game, which is one of the most practical and generous pieces of financial literature that’s surely ever been written.

Rohn’s knack for translating complex messages into seemingly simple aphorisms lives on, as evidenced in his 70-10-10-10 rule (outlined above). One of his most famous quotes is:

“Income rarely exceeds personal development.”

Whether it’s upscaling in your job, forging a little sideline or going full-bore into business, you have to constantly BE more if you want to get more.

A lot of people graduate from university, learn a job for a couple of years and then decelerate the learning process, opting to merely be competent and do an average (or marginally above-average) job in order to stay employed.

By up-skilling, you’re increasing your earning potential exponentially. New skills could land you a promotion that will easily cover the $500 per month we’re investing in an index-linked fund, or you could be generating enough from a side project to cover it (maybe even more).

It’s also fun, interesting, challenging and rewarding to learn something new, isn’t it?

AMOUNT MADE: Unlimited

5. Top up your super

Your superannuation is about the best investment around because its slathered in tax breaks.

By making additional pre-tax contributions, you can charge ever closer to the mystical extra $1 million earnings mark.

But how?

If you’re around 30 years old, earn $100k per annum before tax and have already accrued $50k in super, by the time you’re 60, you’ll have a superannuation pot worth $418,745, assuming 7 per cent annual growth. This is with your employer’s very generous 10 per cent contributions (in Australia, anyway).

However, if you take that figure and chuck in an extra $400 per month pre-tax, the figure leaps to $563,725.

Both numbers include charges of 1.5 per cent per annum (fees under management). This also factors in inflation and rises in living standards over the 30 years we’re looking at. You can run your own calculations here.

If you run the same calculations on a salary of $150k and existing contributions of $100k, then the numbers leap from $665,141 to $810,120 – that’s $144,979 more at retirement.

AMOUNT MADE: $144,979 


That’s it.

Does it put you $1m richer than before you started reading this article?

Nearly. The top-end totals come to $798,174 before we factor in the intangible that is investing in yourself.

Have I told you anything you didn’t already know? Possibly not.

Are you already doing this stuff? Probably not.

As Jim Rohn said, doing this stuff is EASY. But NOT doing it is also REALLY easy, which is why we don’t all do it.

But this is the chance to make close to an extra $1 million before you retire, without really changing too much or having a million-dollar idea.

Isn’t it worth trying, just in case it actually works?