Dave Ramsey just issued a blunt reality check to people under 40: ‘If you don’t retire a millionaire, that’s no one’s fault but yours.’ Here’s the math to hit $11,600,000 at 65

Everyone can be a millionaire

Despite the economic challenges facing young Canadians, Ramsey believes that the average 25-year-old needs to save just a fraction of their annual income to retire at 65 with over $1 million.

However, his thesis assumes that this 25-year-old invests in “good growth stock mutual funds.” According to his calculations, diligently investing just $100 a month into such growth funds could create a $1,176,000 nest egg within 40 years.

Ramsey doesn’t mention any specific growth funds, but his calculations imply a roughly 12.85% annual growth rate.

The Vanguard S&P 500 ETF (VOO) has delivered a compounded annual growth rate of 14.00% since 2010, and the Invesco NASDAQ 100 ETF (QQQM) has delivered 17.24% annually since 2015.

In fact, the S&P 500 has delivered an average annual return of 10.13% since 1957, according to Investopedia.

Given the long-term performance of these index funds, Ramsey’s assumption doesn’t seem unreasonable, even when you take into account the recent volatility in the stock market in response to U.S. President Donald Trump’s tariff announcements. There have been many shocks, dips, corrections and outright crashes in the past 100 years, and the market has always eventually bounced back.

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Ramsey’s path to $11.6 million

The four variables of the compound growth calculation are time, initial investment, regular investment and growth rate. Of these, the only variable you can somewhat control is regular investment.

Investing $200 or $300 a month could help you create a nest egg significantly bigger than just $1 million. Ramsey recommends setting the bar even higher at 15% of gross annual income.

“The average household income in America today is $79,000 USD. If you invested 15% of that ($11,850 USD a year), you would retire with around $11.6 million USD,” he said on X.

The average household income for Canadians is $70,500. Following Ramsey’s rule, you would need to invest $10,575 a year to maximize your retirement fund.

However, most Canadians are saving significantly less than Ramsey’s target. In the third quarter of 2024, the average household savings rate in Canada was 6.10%, down from 7.30% in the third quarter of 2024.The rising cost of living, stagnant wage growth and debt servicing costs are barriers most families face regardless of age.

If you’re in your 20s or 30s, you should probably set long-term financial goals with a margin of safety. The future is highly unpredictable, and there’s no guarantee that inflation and stock market performance over the next 40 years will match the previous 40 years.

Nevertheless, Ramsey’s post demonstrates that even minor adjustments and minimal monthly savings can make a big difference if you start early. You still have time if you’re under 40, which is your most significant advantage.

This is why he encourages young people to reject the doom and gloom. "You can make excuses, or you can take control of your money,” he says. “But you can’t do both."

Sources

1. X:@daveramsey

2. Investopedia:S&P 500 Average Returns and Historical Performance (Dec 26, 2024)

3. Statistics Canada:Quality of life Indicator

4. Trading Economics:Canada Household Savings Rate