Millionaire status was once reserved only for the rich and famous, but sometimes you may need to have at least one million dollars in the bank to retire.
Retirement is more expensive than ever and the average American 65 and up spends about $ 46,000 a year, according to the Bureau of Labor Statistics. If you spend so much every year for 25 years, you spend a total of about $ 1.15 million – and it is not even considering the effects of inflation.
Fortunately, it is not as challenging as you might think to retire to a millionaire, even if you earn an average salary. Just follow these four steps.
first Calculate how much you need to save each month
About $ 1
Two factors that affect this are your current age and your desired retirement age. The fewer years you have to save, the more you need to save each month. While you cannot change your current age, you can choose to delay your pension in a few years to make it a little easier to reach your saving goal.
For example, say you are 35 years old with nothing saved for retirement, and you want to retire by $ 1 million at age 65. With the help of a calculated interest calculator, you find that you need to save about $ 900 a month to have $ 1 million saved at age 65, provided you earn a 7% return on your investment. But if you were to delay your pension to 70, you only need to save around $ 650 a month to reach the 1 million goal.
2nd Be Prepared to Make Some Serious Victims
Retirement with $ 1 million is not easy, but it is more challenging if you retire to retirement age or have not saved elsewhere already. You may even have to save thousands of dollars a month if you are only a decade or two away from your retirement with almost nothing in your retirement fund.
It is simply not possible for some people, but if you are willing to make a sacrifice, it can put your goal within reach. If the money is frequent and you have decided that you have to start saving several hundred dollars a month, start by taking an honest look at your budget and making some cuts.
Depending on how serious you are about retiring with a millionaire, you may have to eliminate all but the most crucial monthly expenses. Start by really cutting unnecessary expenses, including any subscriptions or memberships that you rarely use. Then trim down the nice costs, such as eating out, cable, going to the cinema and shopping for things you don't need.
Finally, if you're still struggling to bring enough money, take a look at your biggest expenses and see if there are ways they can be reduced. Are you, for example, willing to sell your car? How about reducing your home to save money on your mortgage? These are important lifestyle changes, but they can help you save hundreds more per month.
3rd Investing in the stock market
It's one thing to come up with the money you need to save each month to reach your goal. But if you do not invest it in the right place, you will probably be short.
Some believe it is smarter to invest their savings in "safe" investments, such as a money market fund, a CD or even a savings account. These types of investment options have less risk, certainly. But they also have much lower potential returns, so your money doesn't go far. For example, if you invest $ 900 a month in an account that yields an annual return of 3%, you only have about $ 513,000 saved after 30 years – nowhere near your $ 1 million goal.
The stock market may seem scary, but it is the most effective way to earn enough returns to save a large amount of money after retirement age. The key is to make smart investment options to protect your money.
Index funds and funds allow you to spread your money over dozens or even hundreds of different stocks, limiting your risk if one or two companies within the fund take pleasure. While the stock market is always experiencing ups and downs, you can, over time, expect to see an upward trend in your profits.
4th Check in on your savings regularly and make adjustments
With any goal, it is important to check in on your progress regularly and see where you stand. If you are behind where you thought you would be, you might need to make some adjustments to get back on track.
It's hard to tell if you're on the right path for retirement simply by looking at your total savings. Due to compound interest, it may not seem like you are making much progress in the early years, but your savings will grow exponentially after a few decades. If you make smart investment options and meet your monthly savings goals, don't worry if your investments have not increased as much as you think they should – it takes time to see dramatic results.
The things to think about as you give your savings a checkup include factors such as if you have saved as much as you should every month and if your long-term goals are the same as when you started saving. If you have skipped the save for a few months or saved less than you should, you may need to save more each month to do it. Or if you have reason to believe you may not be able to work as long as you originally planned, you may need to increase your savings now if you are forced to retire earlier than you expected.
Departing a Millionaire It is not easy, but it is possible if you are willing to work for it. The sooner you start saving, the easier it will be.