5/16/2011 12:09 PM ET|
Start with $10K, retire a millionaire
Hoping to reach age 65 with $1 million? You can achieve your goal, but getting there requires discipline -- and the earlier you start, the better.
The millionaire next door could be you.
All it takes is money and time; it always does. But what this really means is you have to save money over time, and that's where so many of us struggle.
Reaching age 65 with $1 million saved requires strong discipline and sustained effort. You need to recognize the importance of starting early and putting away money regularly. But even if you don't have so much time, you still have options other than a Hail Mary pass.
It can be done -- even if you start with just $10,000.
- Calculator: Are you saving enough for retirement?
"Whether you're 25 or 45 or even 55, you've got to start somewhere," said Nathan Dungan, the founder of financial education firm Share Save Spend.
Call it a 7% solution. Assume a 7% inflation-adjusted return from a portfolio of U.S. and international stocks, bonds and cash -- not overly aggressive, but an expected return that requires taking some risk -- and living well within your means.
"In order to save, you have to understand your spending," said Eric Kies, a financial adviser with the Planning Center, an investment manager in Moline, Ill. "Build some awareness of where you are now, where do you want to be and what are you willing to do to get there."
Of course there will be bumps along the road -- potholes, even -- that challenge your resolve. The financial markets love to shake and stir individual investors; don't give up, because it may be hard to get back in.
"It's less about where the money is invested and more about your ability to be disciplined," Dungan said. "Ask yourself, What is realistic? What can I achieve? The best savers don't have magical thinking about money. They're honest with themselves."
25 years old: Starting out
Forty years is a long time. So long, in fact, that it's easy to put off saving for the future. There are bills to deal with, college debt to pay, stuff to buy, vacations to take, a career to build.
Savings -- sure, but who has money for that? Indeed, one out of every three Americans between the ages of 18 and 33 has no personal savings, according to a recent Harris Poll survey. What's more, 53% of this age group has zero in the way of retirement savings.
They're missing out, big time. If a 25-year old with $10,000 invested $320 a month at a 7% annual compound rate of return until age 65, he or she would wind up with $1 million.
"There's a reason why Albert Einstein called compounding the most powerful force in the universe," said Jonathan Guyton, a principal at investment manager Cornerstone Wealth Advisors in Minneapolis.
Whether or not Einstein really said this, the math speaks for itself. At 7%, your money doubles every 10 years.
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Some Americans are so f---king stupid! Here’s the best advice I got from my parents; never, never, never ever think you can get something for nothing, if it sounds too good to be true it’s a lie and they’ll want something from you. Go ahead live for the moment sooner or later it’ll catch up with you. But you can’t take it with you and world is coming to an end next year so I guess all the years of working and not impressing my neighbors with the fancy cars, vacations, and houses is all for naught.
It's pretty sad what's happened to the american dream. Had I known how bad this country was going to get and how expensive it was going to be, I may have done a few things differently. I envy our parents who could get by on one income, have a home and a vacation home and still have time to enjoy life.
So the advice here is to work 2 jobs, give all your money to the wall street sharks, don't spend any money and live like a POW so you can have enough money to retire... you know, that time of your life when you have no health or ambition to actually enjoy it... Pretty sad.
For those that say they can't get 7% or more most likely have no idea about finances. My 401k is up 10% this year and I have made much more than 7% even when the market tanked. This is because I took the time to understand the markets and you should too. Or you can make comments like, "It is rigged", "I can't get more than 1-2% from CDs", etc. and continue to live paycheck to paycheck.
Most people get killed in the markets because they think backwards by investing at the peek and pulling back at the bottom. Retirement takes responsibility and discipline, something unfortunately most people do not have. You want to retire wealthy? Study the financial markets like your life depends on it...
If I can save 300 a month , then I am millionaire already !
I love these "one size fits all" articles. So much depends on the cost of living WHERE you live. There's no way one could pay Long Is. or Calif. real estate taxes, etc. and retire on $1 million in those areas. Arkansas or S. Carolina ? That would be a lot less expensive. They don't even mention if the magic ($1 million) figure includes having paid off one's house or not.
And the 7% return on a consistent annual basis is totally unrealistic.
This article would make good since if your a CEO by the age of 25 and making more than everyone else in your company combined. With a lot of Americans out of jobs or working full time and making less than $20,000 a year before taxes, how are they to save enough money? I guess they could save money by walking to work from the homeless shelter, clean the one outfit they own by wearing it in the rain,eat out of a dumpster. They also better make sure they have no kids, no need to waste their money on a family, and they better hope they have no health problems because doctors and medicine cost money. After living this way for forty years they will be able to enjoy their retirement if inflation has not risen to much, they have no major health problems, do not spend to much money on a house,clothes, or a car.
"Retirement" in the future will be far different than it is today. Instead of stopping work at 65 and playing golf and traveling the world, people will be working into their 70s. Instead of relying on the returns of a nest egg, people will rely on various sources of income - rental property, residual income, part time jobs, etc... Wanna secure your financial future? Work now to be able to generate a reliable source of passive income in the future. Build a website, write a book, develop some consulting work, learn to play poker extremely well, purchase rental property, be a silent partner in some local small businesses, buy and sell antiques, teach night classes, etc... In the near future, with inflation risks, rock bottom bond yields, and a sideways stock market, wise retirees will be bragging about how many different sources of income they have, not how big their nest egg is.
Hey folks, thanks for the 'thumbs-up!". As for you naysayers.....tomorrow I take my wife to one of the most fabulous beach resorts in Southeast Asia......and I'll still be getting paid for it
I learned the value of saving at an early age. When I turned sixteen my father insisted I get a job. At the time I already earned money by mowing lawns and baby sitting. My parents never gave me an allowance so by earning by own money it was a good way for me to learn the value of a dollar. Even though I was doing these odd jobs my dad told me to get a job and start paying for my own clothes. I worked part time in a bakery before and after school and on the weekends.
I got my own checking account with my father's help, since I was a minor, and savings account. I learned to balance my checking account and started saving my money. When I graduated high school I had over four thousand dollars saved. I learned to manage my expenses and to budget myself. I started paying rent at seventeen and I worked my way through college.
Even though I was very good at saving money I only put my money in savings accounts and CD's. I was afraid of investing in the stock market. After a time, I lost my fear and educated myself and starting to put my money to work into stocks and other investment vehicles. Most of the stocks I owned are in dividend investment plans. I started small with those stocks and put in a little money each month in the DRIP plans and continued to reinvest the dividends. I was in my late thirties when I started to invest in stocks.
I also invested money in the companies I worked for 401K plans and did my best to contribute the maximum amounts in those plans. I am in my fifties and on paper I am a millionaire. I still have twelve years or more years before I plan on retiring and I hope to double or triple the savings I have now.
In the years since I first stared working I have been through company lay offs. I worked two full time jobs to make a living. I have been through the up and downs of the stock markets and the low interest paying climate in today's financial world. I do not make a six figure salary but have learned to put money away for a rainy day because there is a good chance in your work career you are going to have days it pours.
The investment lessons I learned over the years is to start investing young and learn to live within your means. Manage your debt and diversify your investments. You can become a millionaire and achieve your investment goals if you have an investment plan and are disciplined in budgeting yourself. Live within your means and try not to incure a lot of debt.
I agree with a lot of the comments that have been posted. A million dollars today is not that much money twenty years down the road. I think the point of the article is to start saving today so you can be financial secure for the future. It is a lot easier to do if you start saving and investing at an early age. The time value factor of starting savings early is incredible.
Finally, someone with some common sense! Holy shoot, it's not "rocket-science"! Don't waste time investing in "crap" that has no return, let alone costs you money in the long run, but put your money where it will secure your future! Amen, Bro, you got it right!
Retirement for too long has been discussed in terms of dollar need, when actually it's about positioning yourself to be able to meet your desired needs when father time comet a knocking.
As an example financial planners start with do you want to travel when you retire? I'm like no. . .I want to be able to put food on the table. Travel is a luxury item today and will be tomorrow. To the extent I can improve my ability to partake in more luxurious opportunities I will, but not at the expense of being able to put on the table when I retire.
The bottom-line is this article is saying, "don't waist your hard-earned $10,000 on a down-payment for a house", but invest it in something else that will give you a much better return when you retire!
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