A million doesn’t go half as far as it did, but making a million ^{[1]} is still the first goal of almost any new entrepreneur I meet.

It’s also a target for many savers.

For example, a million pounds can buy you a (hopefully) steady and inflation-proofed income stream ^{[2]} from equity income investment trusts that’s well above the average household income – provided you’re prepared to ride out the volatility of equities. With luck you wouldn’t even need to touch your capital.

Alternatively, if you’re a passive investor and a fan of the 4% rule you might use your million to model a £40,000 a year income in retirement. (But be aware of the many caveats ^{[3]}!^{1 [4]})

But what if you’re still 20 years from hitting the magic number? In that case, inflation strips away the buying power of your hoard. You’ll need much more than a million to buy the equivalent income or assets that you could today.

This was why we created the millionaire calculator ^{[5]}, one of *Monevator’s* small but shiny collection of personal finance tools ^{[6]}.

The millionaire calculator enables you to work out:

- When you’ll make your million, based on your current savings and returns.

- How much you need to save to make a million by a particular age.

The rate your savings grow is shown in a pretty graph, which demonstrates the power of compound interest ^{[7]}.

There are also three currency options, because we’re internationalists around here.

### Understand the effect of inflation

Unlike with some calculators I’ve included an inflation setting in this tool.

Look below the graph and you’ll see what your eventual million is worth in today’s money. The tool also tells you how much you’ll need to save to reach the equivalent of a million today by that target age.

The bad news is you’ll need to save a lot more than you think, but at least the millionaire calculator ^{[5]} gives it to you straight.

Play around with the interest rate setting. This is the rate of return. To get a flavor for what’s reasonable, look at my articles on UK historical rates of return ^{[8]}, or US rates of return ^{[9]} if you’re from over the pond.

If you’re 25 and 100% invested in equities, a 7% return with 2% inflation seems reasonable to me in the current climate. Use a 5% return if you’re more skeptical about future returns, and 3% inflation if you’re skeptical about central banks. Dial down further if you’re older and have more low-yielding fixed income in your portfolio.

Two final points:

- Real life is much more volatile than the smooth graphs from such tools suggests. It’s best to over-save, and be left with the problem of how to spend the excess.

- While having a target sum like a million can be very motivating, you may need to grow your income
^{[10]}to get there in a reasonable time.

I hope you enjoy the millionaire calculator ^{[5]}. Send us a postcard when you make it!

*Also check out our mortgage repayment ^{[11]} and compound interest calculators ^{[7]}.*

- This so-called rule is not a rule, 4% may be far too high a withdrawal rate in the current environment, and it assumes you eventually spend all your capital. A deeper discussion is for another day! [↩
^{[14]}]