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Can you really retire comfortably by saving only $10 a day? You sure can. Read on to see how. [[{“value”:”

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Americans think it’ll take $1.46 million to retire comfortably, according to a recent survey by Northwestern Mutual. You may be inclined to look at a number like that and laugh — not because it’s too large, but because you might assume you’ll never get there.

But if you’ve got $10 a day to save and invest for retirement, then you may be well on your way to amassing a $1.46 million nest egg or larger.

Can you really retire by saving $10 a day?

The idea of saving roughly $1.5 million might seem daunting. And that’s understandable, because that’s an extremely large number.

So don’t focus on that large number. Instead, focus on a daily goal. And a reasonable one to aim for may be $10 a day, or roughly $300 a month.

You might think that won’t get you very far. But if you save $10 a day over a long period and invest your money in stocks, you may be amazed at how much money you end up with.

The S&P 500’s average annual return over the past 50 years is 10%. That accounts for periods when the market soared, and periods when stock values tumbled.

If you invest $10 a day, or $300 a month, over a 40-year period, and you put that money into a stock portfolio that gives you a 10% yearly return, then you’re looking at a balance of almost $1.6 million. That’s a little more than the $1.46 million Americans seem to think is the magic retirement savings number.

How to find the best home for your retirement savings

You could save for retirement in a top-rated brokerage account. That way, you get a lot of freedom. You can contribute as much money as you want each year to that account, and you can withdraw your money at any age and for any reason.

But wth an IRA, or individual retirement account, you’re subject to certain restrictions. First, there’s a limit as to how much money you can contribute every year. Right now, you can put in up to $7,000 if you’re under 50, or $8,000 if you’re 50 or older.

If you’re planning to save $10 a day for retirement, these limits aren’t an issue. The bigger issue may be that with an IRA, you face a 10% penalty for taking withdrawals before age 59 1/2 (though there are a few exceptions, such as being able to remove up to $10,000 penalty-free to buy your first home).

But the benefit of using an IRA for retirement savings is getting a huge tax break on the money that goes into it. If you’re contributing $300 a month, or $3,600 a year, that’s income you aren’t paying taxes on. You’re also not paying taxes on investment gains in an IRA year after year. Rather, gains are tax-deferred until you take withdrawals during retirement.

For these reasons, it pays to consider opening an IRA for your retirement savings. Click here for a list of the best places to open an IRA, and then start funding that account with $10 a day immediately.

You can also pool your $10 a day into a $300 monthly contribution, but some IRAs will allow you to set up an automatic $10 daily transfer. The more time you give that $10 a day to grow, the more likely you are to be pleasantly surprised by your results.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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