People say a million dollars ain’t what it used to be—but it’s still five to six times more than the average American has when they retire. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free For most Americans, a million-dollar nest egg still sounds like a fantasy. Sure, the stock market has done well over the last eight years, but only half of Americans actually own any stock. And homeownership rates remain near 50-year lows, so the surge in real estate values has only helped about six in 10 Americans. How can the average American break from the trend? What would it take to reach a million-dollar nest egg? Glad to hear you’re aiming high! Here are seven steps to build seven-figure retirement savings. 7 Achievable Steps to Reach 7-Figure Retirement Savings 1. Remember: Procrastination steals your compound returns. Here’s a quick illustration of the devastating effects of procrastination. Let’s assume an average return of 8 percent, and let’s say you want to retire by 62. How much savings does it take to reach a million dollars? If you start investing at age 22, it takes roughly $284/month. If you start investing at age 32, you’ll need to save and invest $670/month. It’s already getting uglier. For those who wait until age 42, your mandatory savings is now around $1,700/month. Ouch. And those poor, procrastinating souls who wait until age 52 before they start investing? They’ll need to invest nearly $5,500/month! There’s a Chinese proverb I like: The best time to plant a tree was 20 years ago, but the second-best time is now. You can’t go back in time and invest more, but you can double down starting now. Every year that goes by will cost you exponentially later. 2. Take advantage of tax advantages. By some estimates, nearly half of Americans have no retirement accounts. Sure, they might have some money stashed away elsewhere, but retirement accounts come with some pretty stellar tax benefits. When you invest money in an IRA, 401(k), or other similar account, you score an immediate savings of whatever your income tax rate is. Between federal, state, and local income taxes, that can be higher than 50 percent. To shun these accounts is to give up that instant return on investment. And that’s before the first cent in actual returns is earned. Then, there are employer contributions. Many employers offer matching contributions; if you contribute $100, they will also add $50 to $100 to your account. That’s free money in the most literal of senses. Related: Want to Retire Early? Sorry, But Much of Your Net Worth May Not Help Many Americans are eligible to contribute to both an IRA and a 401(k). Take advantage of them if you can! Also, understand the difference between traditional and Roth accounts. It’s not rocket science: In a traditional account, you don’t pay taxes on the money this year, but you will need to pay taxes on the returns when you pull money out later. In a Roth account, you still pay taxes on the contributions this year, but all of the returns are tax-free when you pull money out later. You don’t need to choose one or the other. Set up both types of accounts and invest in both! 3. Automate your investments. Be honest: Is your savings the first money set aside when you get your paycheck, or do you simply save what you have left at the end of the month? Your savings and investments should be the first “bill” that you pay, every time you get paid. Set up automatic transfers, so you don’t have to think about it. One automated transfer can go to your IRA, another to your Roth IRA, another to your real estate investing account (more on that momentarily), etc. Money that’s just sitting in your regular checking account has a way of being spent. That’s why it’s so critical that you prioritize your investments and “pay yourself” first. See Step No. 1 above for additional motivation to prioritize savings. How high can you raise your savings rate? Aggressive savers live on half their income! Challenge yourself to reach for higher savings than you currently think possible. Here are some tips for how to live on half your income. You’ll be tempted to move into a bigger home when you get a raise—or buy a fancier car or go out to eat more often. Avoid the temptation. When you get a raise, put most of it right into higher automated transfers to your investing accounts. Avoiding lifestyle inflation is half the battle! 4. Balance equities with real estate. Stocks and mutual funds are great. But real estate has many of its own unique advantages, so balance your stock portfolio by also investing in rental properties. Look no further than Ashley Thompson, who reached financial independence in her 20s by investing in rental properties. To begin with, real estate adds diversity to your portfolio. If the stock market crashes, the real estate market may continue doing just fine, thank you very much. Perhaps more importantly, rental market crashes are rare, so even when housing values drop, rents often remain strong. That’s what happened in 2008: Housing values dropped 25 to 30 percent, but because so many people went from homeowners to renters, rents held their footing. Rents also rise with inflation—or more accurately, act as a driving force behind inflation. That means that rental properties serve as a hedge against inflation and do not lose money to inflation the way stock and bond returns do. Rental properties are more income-oriented than equities. Sure, some stocks pay dividends, but the real meat behind stock returns are usually found in capital gains. Perhaps most important of all, rental property returns are more controllable and predictable than stock returns. An investor can accurately forecast cash flow by anticipating and adjusting for costs like repairs, CapEx, etc. Even better, investors maintain a degree of control over their returns and can even raise values and rents in a single weekend! 5. When bears attack, be prepared. Bear markets happen. Corrections and even crashes are a part of market economics, a fact of life for all investments. As mentioned above, rents tend not to suffer big drops like stock and home values sometimes do. But they aren’t the only protection and preparation you’ll need. First, be emotionally prepared. When markets turn south, don’t panic. If you sell every time the market drops, you’re setting yourself up to sell low and buy high. When it becomes clear that the market is in the midst of a correction or crash, consider buying, not selling. The next part of being prepared is keeping a cash reserve. All landlords need a cash cushion to pay for repairs, vacancies, and other costs associated with owning properties, but everyone should have an emergency fund, too. That cash cushion will provide some peace of mind, even while your stock portfolio rides the dip. Lastly, remember that market corrections are most dangerous around the time you want to retire. If you’re 20 years away from retiring, don’t sweat corrections. If you’re at retirement age, look for ways to not bleed any of your nest egg during a dip. Consider continuing to work, temporarily cutting expenses, maybe taking a part-time job doing something fun while you ride out the storm. This too shall pass! 6. Don’t bother trying to beat the market. Take a guess: How many actively-managed funds actually “beat the market” and perform better than stock indexes? Two-thirds? Half? A quarter? A tenth? Just over one in 20, according to a study by Standard and Poor’s. That’s atrocious. And the worst part is that these actively-managed funds are much, much more expensive than simple index funds. Who wants their investments to lose money to fund managers on Wall Street, especially when the funds nearly always underperform the market? Spread your equity investments between U.S. index funds and international index funds. Within those, balance large, mid, and small cap funds. Easy peasy. Related: Case Study: Yes, It IS Possible to Retire a Millionaire With a $30K Starting Salary 7. Keep your eyes on the prize. Take 15 minutes to reflect on your long-term financial and life goals. Write them down, and put them where you’ll see them frequently. Add a photo or two, something meaningful that reminds you what awaits you when you reach your goals. Then set reminders on your calendar to review your goals, progress, and net worth at least once every quarter. If you haven’t already, set up a Mint.com account to showcase your entire net worth on one page, updated in real time. It’s hard to deny yourself that new gadget or pair of shoes that you want right now, to defer gratification for some nebulous idea of retirement decades away. Do everything you can to make your financial goals as real, as immediate, as tangible as possible. Remember, if you start saving with 40 years’ worth of compounding, it only takes $284/month to become a millionaire. If you fall behind and try to play catch-up, it will cost you $5,500/month to become a millionaire in 10 years. Aim for Financial Independence, Not Retirement Retirement sounds nice—in a vague sort of way. Play a little golf, relax on the beach a little more, maybe winter in Florida or Arizona, right? Not so fast. First of all, that dream sounds too vague to inspire you to actually keep your spending low, denying yourself all those shiny things you want now. And oddly enough, it turns out Budd may have been right when he drawled in Kill Bill that “the number one killer of old people is retirement.” No, really—it seems like every year, a new study comes out showing that people who retire younger end up dying younger. These studies even adjust for those who retire early for health reasons. There are more centenarians in Okinawa, Japan than anywhere else. Know what they call “retirement”? They don’t. Seriously, they don’t even have a word for it. They work doing something meaningful and enjoyable, and live decades longer because they remain engaged. Set a goal to become financially independent. You can reach it at any age (just ask Ashley Thompson), and when you do, your options multiply. In retirement, people do less. In financial independence, people can do more—they can do anything they like, in fact. Leave retirement to the decrepit. Aim for that seven-figure nest egg, but do it for financial independence, for fun, to call yourself a millionaire. When you reach it (as I know many of you will), you can happily move on to—well—whatever you want! What has worked for you in terms of saving and investing more? What tips can you share with your fellow aspiring millionaires? Weigh in below!