Millionaire Musings

Here's an exercise I thought of when I was teaching school years ago. I would tell each of my 25 students to take a sheet of lined paper and make 4,000 marks on it. With 25 lines per page, that was 160 marks per line. When they finished, I taped up all the papers on a wall, and we stood back and admired just how many marks we had made in total. And then, I'd remind them that a million is 10 times more than that.

More context
Here are two other ways to think about a million:

• If you work 50 hours per week and earn a million smackers per year, that amounts to about $385 per hour, or about $6.42 per minute.
• Remember that as big as it is, a million is a mere thousandth of a billion. Warren Buffett's Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) recently sported $47 billion in cash and cash equivalents. That's 47,000 times a million. Last time I checked, Microsoft's (Nasdaq: MSFT) market capitalization was around $315 billion. That's 315,000 times a million.

It's not enough
Still, a million isn't what it used to be. Thanks to inflation, while $1 million would have been enough to buy you 3.2 million gallons of gas 50 years ago, today it will buy you only about 10% of that amount. It would have bought you some 400 average houses in 1957, but only four or five average-priced homes today.

This is why we shouldn't dream of just making it to $1 million anymore. There's a good chance it won't be enough to sustain us in our retirements. I've learned in the Fool's Rule Your Retirement newsletter service that in order to make your nest egg last, you should conservatively plan to withdraw about 4% of it per year in retirement. So, 4% of $1 million is $40,000. Will that be enough? Maybe -- if you have Social Security and some pension income to supplement your spending. But even that might not be enough.

If you want to enjoy a retirement income in the neighborhood of $60,000 per year, aim for a $1.5 million nest egg. For $80,000, aim for $2 million. If you start with $100,000 today, you can grow it to $1 million in 25 years, at 10% per year. If it grows at 12% per year, it will take 21 years. At 14%, it will take 18 years.

The main takeaway here is to get cracking on your saving and investing for retirement. It's not too late to start, or to increase your efforts. Many well-known companies are capable of growing at more than 10% per year. For instance, look at these stocks:

With good investments, all it takes is time to get to your goals -- no matter how lofty they are.