Here’s What It Would Take to Achieve a Billionaire Retirement by Age 65

Would you like to become a billionaire by age 65? Of course you would! Would you believe that it’s actually possible? Well, it is. Sort of. You’ll have to clear several high hurdles in order to get there. But if you don’t quite get to billionaire status, you may still attain millionaire or multimillionaire status, which is still pretty good.

Read on to learn how you might become much, much wealthier than you are today.

All about compounding

You’re probably familiar with compounded interest, which you can earn on investments in things like savings accounts. It’s when your investment grows in value each year — and the amount by which it grows also grows, year by year. Money invested in stocks can grow similarly — in a compounding fashion — though gains every year are not guaranteed and growth rates will differ from year to year. Over long periods, though, the stock market has always gone up — recovering from its occasional small or large pullbacks. Over many decades, the stock market (as measured by the S&P 500) has averaged annual returns close to 10%.

Here’s a simple example: Assume that you’re going to start with $0, invest $12,000 per year (that’s $1,000 per month), and that your money will grow, on average, by 8% annually. The table below shows how your money will grow over the first few years:

Data source: Author.

Note that 8% of $12,000 is $960, which is how much your investment grows in its first year. But in each subsequent year, it keeps growing by more. By the end of five years, you’ve invested a total of $60,000 and you’ve gained an additional $16,031.

We’re far, far from the billionaire neighborhood, though, so let’s see what kind of investments will get you there. (Spoiler: It will take more than $12,000 per year.)

Becoming a billionaire

Probably the most reliable path to a billion dollars is by steadily investing large sums over long periods, earning a reasonable return on them: For example, you’ll get to a billion dollars in any of the following six ways:

• Invest $740,000 annually for 60 years, earning an 8% return, on average.
• Invest $1,650,000 annually for 50 years, earning an 8% return, on average.
• Invest $3,550,000 annually for 40 years, earning an 8% return, on average.
• Invest $8,200,000 annually for 30 years, earning an 8% return, on average.
• Invest $20,500,000 annually for 20 years, earning an 8% return, on average.
• Invest $65,000,000 annually for 10 years, earning an 8% return, on average.

Those options above assume that you have a lot of money to invest — and/or that you have a lot of time before you hit age 65. If you do have a lot of time — maybe you’re 22 right now and are willing to wait until age 82 — you’ll only have to sock away around $740,000 each year. But even that is a tall order for just about every 22-year-old (or 60-year-old!).

Getting to a billion by investing like Warren Buffett

So you might try to become a billionaire by aiming for a steeper growth rate than 8%. Warren Buffett is arguably the best investor around, and he has averaged annual returns close to 20% over decades. So let’s look at how you might reach a billion dollars if your money grows by 20% annually:

• Invest $3,000 annually for 60 years, earning a 20% return, on average.
• Invest $20,000 annually for 50 years, earning a 20% return, on average.
• Invest $115,000 annually for 40 years, earning a 20% return, on average.
• Invest $710,000 annually for 30 years, earning a 20% return, on average.
• Invest $4,500,000 annually for 20 years, earning a 20% return, on average.
• Invest $32,000,000 annually for 10 years, earning a 20% return, on average.

The options above are clearly more attractive — though, again, most of us don’t have 50 years in which to invest or $710,000 or more to invest annually. And if you want to become a billionaire by age 65, you might need to start at age 15. There are other problems, too:

If earning an average annual return of 20% were relatively easy, we would have many more billionaires than we do. Even Warren Buffett has made some investments he regrets and has lost money on them. To have just a hope of earning eye-popping 20% annual returns over long periods, you’d probably need to devote a lot of time to studying investing in general and investments in particular, in order to find the most promising growth stocks.

Aim a little lower, to become a millionaire

If you’re starting to give up on your dream of becoming a billionaire, that’s OK. Because if you’re willing to put in a lot of time and effort, you can probably become a millionaire! The table below shows how:

Data source: Author.

So take some time to think about how much you might be able to invest regularly, and think about how you’ll invest. A simple S&P 500 index fund can be all you need. If you stick with it over a long period, you can greatly improve your future financial security.