raining money on couple

How to Become a Millionaire by 40

A millionaire by the time you turn 40? It sounds unbelievable, right? But if you are in your early 20s, fresh out of college, starting a new job, and have the will to become a millionaire as soon as possible, you can make that happen before you turn 40.

It will require some self-discipline.

This article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link.

You can learn to mentally and emotionally commit to the goal. This means you may have to give up on certain experiences and possessions that many young people enjoy that early in their lives.

You can train yourself to stay the course until you reach the goal.

The steps are clear – minimize your living expense, maximize your savings, get a side hustle, and invest.

7 Strategies to Help You Make Your First Million by 40

1. Start a 401(k) Early and Make Maximum Annual Contributions

Begin your 401(k) as soon as you land your first job after college and start making the biggest contribution possible. If your employer offers a matching contribution, make sure that you make the maximum possible contribution. For 2020, that’s $19,500 per year.

Let’s see how this strategy works to make you a millionaire by 40:

You sign up for the company 401(k) plan immediately after landing your first job. You max out your annual 401(k) contribution at $19,500. With an employer matching contribution of up to 5%, you can easily achieve $1 million by age 40.

Here’s an example of how to become a millionaire (almost) by age 40 if you start investing a age 24 and contribute the maximum amount every years.

These assumptions don’t include an employer contribution, which would speed up the opportunity to become a millionaire by 40.


  • Contribute $19,500 per year starting at age 24
  • Earn an average of 7.5% annual return
millionaire by 40 with 401k graph

image/data credit: calculator.net/future-value-calculator

By age 40, without increasing contributions, or adding in an employer contribution, your 401k account will be worth approximately $750,000.

Click on the Blooom image to get a FREE 401(k) or IRA analysis. You might be able to reduce fees and increase your returns, so you reach $1,000,000 sooner.

2. If You’re Self Employed – Open a Solo 401(k) or SEP IRA

If you are self-employed, you’ll certainly not have an employer-sponsored retirement plan, but that should not stop you from being a millionaire by 40.

There are two retirement plans designed for self-employed individuals: Solo 401(k) and SEP IRA.

Solo 401(k) is a 401(k), but it’s designed for a single participant (spouse can be included). But since in this plan, you are both the employer and the employee, you can make contributions as an employee and as an employer. Just like the employer-sponsored 401(k) plan, you can make the ’employee’ contribution of up to $19,500 for 2020. And an ’employer’ contribution can be up to 25% of your income. The full limit of contribution is $57,000, which can surely help you become a millionaire by 40. 

The other option for a self-employed individual is SEP IRA. You can contribute up to 25% of your self-employment income to the plan

In most cases, the solo 401(k) is a better option to make a million quickly. You can also add an IRA mix to increase your total retirement contribution.

3. Buy Real Estate

One of the best ways to become a millionaire is through buying real estate. You can even buy real estate in a self-directed retirement account.

One of the best ways to become a millionaire by age 40 is through making 401(k) real estate investments.  It promises a high ROI with little risk.

You generally cannot invest directly in real estate through an employer’s 401(k) plan, unless there’s a real estate investment fund on the plan’s investment offerings. But you can choose to roll over your 401(k) account into Self-Directed 401(k)/Solo 401(k), Roth Solo 401(k), or Self-Directed IRAs and make 401(k) real estate investments.

You can even buy real estate like you purchase a stock with a REIT. A REIT is a type of investment that deploys your money into a wide range of real estate investments. Sample REITs:

  • VGSIX-Vanguard U.S. REIT Index Mutual Fund
  • VNQ-Vanguard U.S. REIT Index ETF
  • RWR-SPDR Dow Jones Index REIT ETF
  • VNQI-Vanguard Global ex-U.S. Global Real Estate ETF
  • FGL-iShares Developed Real Estate (ex-U.S.) ETF International Fund.
  • RWX- SPDR Dow Jones International Real Estate exchange-traded fund

There are also scores of sector REITs that invest in office buildings, storage units, university housing, nursing homes and more.

One of the newest ways to invest in real estate is through real estate crowdfunding. Like the name suggests, you’re able to partner with other investors to invest in large real estate projects of various types.

Want to invest in commercial real estate? You can become part-owner in apartment complexes for as little as $500. Invest today!

And of course there’s the old fashioned way of investing in real estate through buying real property. You can then rent the real estate out or fix it up and resell it.

4. Maximize Your Savings

Most financial experts recommend saving 10% to 15% of your income towards your retirement. But, here we are not talking about retirement. We are talking about becoming a millionaire before turning 40 (25 years before you retire). We are talking about saving 30%, 40%, or 50% of your income. This can be painful.

Here’s how much you would need to save and invest each year from age 24 to age 40 if you want to get rich and reach a million.

Using the same 7.5% return assumption, you’d need to invest $32,000 per year to become a millionaire within 16 years.

That means, not only would you invest within your retirement account, but you would also need to invest in a traditional brokerage account or fee-free robo-advisor.

It’s easy to set up an investment account at any number of investment companies.

We like SoFi Invest because they are a robo-advisor that helps you invest for FREE and also offers access to financial advisors and career coaches.

5. Diversify Your Investments

If you want to become a millionaire before 40, you need to keep adding to your savings and investing the money so that it grows. Since the financial markets fluctuate, it is wise not to keep all your eggs in the same basket, so that when one investment stumbles, you’ll have others to boost your returns.

The best way to build wealth while protecting your assets is to build a diversified investment portfolio. Put your money not only in stocks and real estate, consider different asset classes to balance the risk.

There are folks who invest in websites, mobile home parks, collectibles, currency, private equity and more. These might be riskier than typical stock, bond, and real estate investing.

Bonus: 10 Best Alternative Investments

6. Start a Side Hustle

One of the secrets of the wealthy are that they have multiple streams of income. That way, if one source of income dries up, you’ll have others to offset the loss.

There are many creative ways to make extra income. The new gig-economy has made it very easy to pick up extra cash, on the side. Driving for Uber, Lyft, Door Dash and other sites is an easy way to make money on your own terms.

Task Rabbit, Etsy, and Fiverr allow you to sell your services on busy websites that match up sellers and buyers.

Then there’s the old fashioned way of selling by setting up a booth at a swap meet to sell baseball cards, crafts or water.

It’s also easy to advertise locally through Craigslist. There was a guy with a truck that picked up junk and transported it to the dump for big bucks.

The key with any side hustle, is to make sure that you save and invest the extra money.

7. Live Modestly

You can’t live large and save a lot simultaneously. It doesn’t work.

The Millionaire Next Door details the stories of average men and women who have amassed a million dollars, while living a simple life.

If you want to amass a million dollars fast, you need to live well below your means. That means, making the conscious decision to live simply and forgo many of the luxuries and “perceived necessities” of today.

You may even wish to surround yourself with friends with a similar mindset. It makes it easier to become a millionaire by 40 if you’re in the company of others with similar goals.

For more strategies to build wealth and become a millionaire, check out How to Get Rich Without Winning the Lottery.

Statistically, about a third of 1% of the population are millionaires by age 40. But if you want to be in that group, you have to be ready to commit time, effort and lots of money to reach the million-dollar mark. And it’s not going to be an easy journey.

Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t personally believe is valuable.

Author Bio: Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning, and over the last 10 years has turned his focus to self-directed accounts and alternative investments. Rick regularly posts helpful tips and articles on his blog at SD Retirement as well as Business.com, SAP, MoneyForLunch, Biggerpocket, SocialMediaToday and NuWireInvestor. If you need help and guidance with traditional or alternative investments, email him at [email protected]