You may want to retire a millionaire but don't earn the income to make that possible. While building wealth might seem easy if you're a doctor, lawyer or banker, what about the average Australian?
According to May 2019 data from the Australian Bureau of Statistics, the median Australian income is $1,634 per week or $84,968 per year.
But if you're in a profession that doesn't offer lofty salaries, it can seem like the goal of retiring a millionaire is simply out of reach.
Let's take a look at some basic numbers to see if you can invest your way into the Millionaires' Club on the ASX.
How to retire a millionaire by investing on the ASX
For this quick example, let's assume this 30-year-old investor takes home $50,000 after tax each year.
After taking out living expenses, this Fool might have a spare $10,000 per year to invest into their ASX shares. The investor wants to stop working at the age of 65 and retire a millionaire. So, how hard is it?
Starting from $0, that leaves an estimated $10,000 per year to work with for the next 35 years. As always, diversification is the key to boost returns and reduce risk in the markets.
An evenly-split portfolio between ASX dividend shares can absolutely get the job done for this Aussie investor. Let's put one-third of all earnings into each of Alumina Limited (ASX: AWC), Harvey Norman Holdings Ltd (ASX: HVN) and Westpac Banking Corp (ASX: WBC).
At current rates, that annual dividend yield should be 8.59% and we'll assume no capital gains, a constant yield through to retirement and reinvested dividends.
By investing $10,000 per year, every year into this high-yield portfolio until they're 65, this Fool would actually retire a millionaire twice over, with $2,135,316. Not a bad return given the investor was putting in just $10,000 per year from the age of 30.
The beauty of compound returns is the key here. Our 8.59% dividend yield portfolio would actually pass the $1,000,000 mark at the end of year 27, when the investor is 57 years old.
Foolish takeaway
It's easy to see that the key here is to pick high-quality ASX dividend shares and have time on your side. The earlier you invest in the market the longer and harder your money can work for you.
While the example above is very simplified, it shows it is very much possible to retire a millionaire through investing with a low salary.
