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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TO THE AUTHOR : Unnecessary to use the phrase 'HAIL MARY PASS".
You must respect all religions, for God's sake
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
But if you did have $10k to start with, first instincts would be putting a down payment on a house.
So basically, this article is saying "Don't use your $10k to for a down payment on a house."
Lets start with 1 million, and maybe I will get back $10k.
After 40 years of frugal living, running 10 year old cars and investing in solid companies my wife and I saved over million. We sold all our stocks at the highest the DOW has ever been back in September 2007. These funds were not tax deferred and I had to pay full taxes on the profits, but if we did not sell then, we would have lost about 40% of the capital appreciation.
Both my wife and I have been in Real Estate for many years and had been investing in 1031 exchange property. We kept on buying bigger and more expensive run down properties, upgrading them and sold at a profit. We believed in the 3 L'S of Real Estate, namely, LOCATION, LOCATION AND LOCATION.
Our most recent purchase which was back in 2006, before the crash, was a steal at the time,
but with city, county, tax, insufficient funds, etc. this investment of 24 top notch condos is sitting and waiting to be foreclosed on. Back in 2006 at 56 years old, we could have retired fairly comfortably, with a paid off house, and assets of 1.5 million. We decided to continue investing as this project looked the best ever, so we put a substantial amount in and as things regressed or crumbled my wife and I were pushed, prodded and coaxed to put all our investment savings into this lost cause. We now can never retire.
Oh sure, accumulate wealth only to be demonized by Democrats as unfairly getting ahead and should be heavily taxed to "spread the wealth" around. No no. What we should do is live as modest as we can, sending the rest to the US treasury because the federal government knows far better than we do how are money should be spent or "invested"!
This formula never worked for one person in the history of the world. If so please document.
All it takes is one bad year this formula blows up. and there will be 20. LOL
Buy a house and SAVE your money is the best for almost anyone.
Saving money compounds interest because you never lose for ANY Year.
Investing has losing years and the compounding defeats your purpose.
Example- If your lucky enough to get a 100% profit but it retraces 50% your only EVEN! Not ahead 50%!
10k turns into 20K (100% profit) then it loses 50% your back to 10K.
You cant ever win in the long term with those odds.
To add to my previous post, I also am glad "When789" mentions other important factors - inflation as well as government theft (which they refer to as "taxes") cuts into savings as well. Here is just a list of "taxes" King George imposes: (google "list of taxes").
The government is the only business that has absolutely no accountability to its shareholders, and can still stay in business while not only providing 0% return, but actually inflicting debt upon its shareholders. They can take and take without being required to use the money responsibly or provide a legitimate good or service in return. Other such organizations that operate in such a manner are Italian mafia families. A bit off topic, but taxes are more accuratley are described as theft/robbery (threat of imprisonment). And with government theft and inflation, in addition to the laughable 7% this author drums up, I'm not sure what the writer is smoking.
The writer of this article is living in some world other than this one. first point is nobody has the extra money to invest long term that the writer describes. second after long years of investing in mutual funds the enron scandal and every subsequent bubble has completely decimated twenty five years of disciplined investing you don't even get your principle back. To trust this model or these bankers is to insure like me you to shall never retire and all that you set aside for your future they will take in there bonuses.
Good luck but putting what you able to save in a coffee can is safer than investing because there is no return from funds not short term or long term, and there never will be.
Did you grow up in a completly different era? YES
Are you points valid? NO
These articles are subjective. 401 K plans, for the most part, are never what they seem to be. You take one step off the beaten path, and you will loose tens of thousands of dollars. Also, If you think you will be able to retire early with a 401 K plan??? Guess again, unless you want to loose a huge portion to taxes, and back taxes.
Trusting these financial "EXPERTS" is like rolling dice...These are the same people who have predicted 3 years in a row, $5 gasoline by summer in most areas...it never happens, and it manipulates individuals to invest accordingly...Think before you make investments...avoid 401 K plans if possible, and seek alternative ways to invest in your future!
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