Can You Retire a Millionaire on a $50,000 Salary?

Americans believe it will take $1.27 million in savings to retire comfortably, according to recent data from Northwestern Mutual. And if you earn $150,000 a year, it may be more than possible to grow an IRA or 401(k) balance that large. 

But what if you only earn $50,000 a year and you don't expect your wages to change substantially in your career? You might assume a $1 million nest egg is off the table. But here's why you'd be wrong.

It's all about starting early and investing savvily

If you wait until your 40s or 50s to start saving and investing for retirement, then you might struggle to accumulate $1 million or more -- especially on a $50,000 salary. But if you begin saving and investing at a much younger age, things look very different.

Many people start working full time in their early 20s. Now, it may not be feasible to start saving for retirement right away, since you might have credit card debt to pay off and an emergency fund to build. But let's say you're able to start saving for retirement at age 25. If you don't retire until 65, that gives you a 40-year window.

Meanwhile, the way you invest your money could dictate how likely you are to get to $1 million. Some people shy away from investing in stocks because of the risks involved. But you should know that over the past 50 years, the stock market has delivered an average annual 10% return before inflation, as measured by the performance of the S&P 500. So if you invest your retirement savings in stocks over multiple decades, there's a good chance you'll get to enjoy a similar return.

Now, let's talk about retirement plan contributions. If you earn $50,000, you're probably not going to sock away 15% to 20% of your earnings. But what if you were able to save 5% of your income, or $2,500 a year, over 40 years? In that case, assuming a 10% yearly return, you'd end up with a nest egg worth $1.1 million. 

Getting to $1 million can be done, but it won't be easy

Clearly, it's possible to retire a millionaire on a $50,000 salary. But that doesn't mean it'll be easy. Parting with $2,500 a year isn't as big a sacrifice when you earn $100,000 or more. But when you earn $50,000, it's a lot of money to give up spending. 

Contributing $2,500 to an IRA or 401(k) every year could mean passing up the opportunity to upgrade your car or upsize your apartment. It could also mean spending less money on leisure and being more careful about the purchases you make.

But if you want to retire with a nice pile of money and enjoy a comfortable lifestyle as a senior, then those sacrifices are worth making. And who knows? In time, you could end up with far more wealth than many of your peers, even if their salaries are double or triple what yours is.