Want to retire with $5 million in America? Here's what that life actually looks like — and 3 top secrets on how to achieve it

Live below your means

The first step toward building a sizable retirement nest egg — whether in the amount of $5 million or otherwise — is to get into the habit of living below your means. You can’t save for the future if you’re spending your entire paycheck on expenses every month.

A good way to consistently carve out money for your long-term savings is to keep your larger recurring expenses on the low side. The typical rule of thumb with housing, for example, is to try to keep your costs to 30% of your income or less. But if you’re able to secure housing that only eats up 15% of your pay, for example, you’ll have that much more leeway to devote money to savings.

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Learn how you can set yourself up for a more prosperous future by exploring why so many people who work with financial advisors retire with more wealth.

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Use time to your advantage

Some people put off retirement savings when they’re younger to focus on near-term goals — things like shedding student debt and saving for a down payment on a house. It may become easier to save for retirement as you get older and your salary increases. But if you want to retire with a lot of money, it’s important to start saving and investing from as young an age as possible.

The S&P 500 has historically rewarded investors with an average annual return above 10%, accounting for both strong years and downturns. If you sock away $1,100 a month for retirement over a 45-year period at an 8% yearly return, which is a bit below the index's average, you'll end up with around $5.1 million. But if you wait even five years to start saving and investing that same monthly sum, you'll be looking at a nest egg closer to $3.4 million.

Of course, $3.4 million is still a lot of money. And you can certainly live comfortably on that sum. But it's not $5 million.

Maintain a diversified investment portfolio

Though it’s possible to grow your money into a much larger sum by investing over a long period of time, it’s important to maintain a diverse mix of investments. This gives you protection in case certain sectors of the market take a beating.

An easy way to diversify your holdings is to load up on S&P 500 or total stock market ETFs (exchange-traded funds). Here, instead of buying shares of companies individually, you’re investing in funds that give you exposure to the broad market. It’s a good option to fall back on if you’re trying to save and invest aggressively but you’re not comfortable hand-picking stocks on your own.