The 10 golden rules of retiring rich

You don't have to be a millionaire now to be a millionaire at retirement. Find out the secrets behind retiring rich.

By MSN Money Partner Mar 6, 2014 12:24PM

This post comes from Maryalene LaPonsie at partner site Money Talks News. 

Money Talks News on MSN MoneyThe median worker's retirement fund contained a meager $79,300 in 2010. That fun fact comes courtesy of professional services firm Towers Watson and might make you think retiring rich is out of reach for most people.

Think again.

Don't let the statistics scare you. With a little advance planning and self-discipline, you might not ever be famous but you could be rich.

To build a golden nest egg at retirement, here are the 10 golden rules of retiring rich.

Rule 1: Spend less than you earn

The formula for retiring rich starts with you actually putting money in the bank. Social Security alone isn't enough to have you living the good life during your golden years.

Money Talks News financial expert Stacy Johnson recommends you spend only 90 percent of the money you make and sock the remaining 10 percent away.

If you have zero savings right now, concentrate on building up an emergency fund in a savings account first. Once your rainy-day fund is full, put that 10 percent you're not spending into a dedicated retirement fund.

If you're currently spending more than 90 percent of your income each month, you may want to read about how to save $1,000 by summer.

Rule 2: Start saving early

Thanks to the power of compounding interest, a little money saved now can go a long way at retirement time. But to get the most benefit, you'll want to start saving as early as possible.

Let's say you're 20 years old and can manage to put away only $100 a month into your retirement fund. Assuming you average 8 percent returns, you'll be closing in on having half a million dollars -- $463,806 to be exact -- by age 65. Even better, over that 45-year period, you'll only have invested $54,000 of your money to get all that cash in return.

If you wait until you're 40 to start saving $100 a month, you'll put in $30,000 of your money and get $87,727 in return by age 65. Not bad, but wouldn't you rather have half a million?

Rule 3: If you start late, make up for lost time

Maybe you're age 55 and think you've missed your window of opportunity to retire rich. Don't raise the white flag just yet!

The government allows those 50 or older at the end of the year to make catch-up contributions to their retirement funds. You can contribute an extra $5,500 to your workplace retirement program, such as a 401k, for a total annual contribution of $23,000. IRA catch-up contributions are $1,000 for a total allowable contribution of $6,500 each year.

You might think there's no way you'd ever have $6,500, let alone $23,000, to invest in a single year, but you may be surprised at when and how you come into extra cash. You may benefit from a loved one's estate, downsize your home or sell your boat or other large toy that no longer fits your lifestyle. When you find yourself on the receiving end of a windfall, don't blow it on a vacation; put it in a retirement account if you want to retire rich.

Rule 4: Don't leave free money on the table

If someone tried to hand you $100, would you say no?

That's exactly what you're doing when you fail to take advantage of a 401k employer match. Your company is basically giving you free money with the only string being you need to pony up some of your own cash for the retirement fund too.

Reitred couple wrapped in blanket © Ariel Skelley, Blend Images, Getty ImagesYou won't get rich by passing up golden opportunities like this for extra cash. If your employer offers a 401k match, make sure you are taking full advantage of it.

Rule 5: Minimize your taxes

The rich stay rich, in part, because they're savvy enough not to let Uncle Sam take too much of their money.

When you're investing your retirement money, be sure to use tax-sheltered accounts such as IRAs and 401k's whenever possible. In addition, be smart about which type of account you use.

Traditional retirement accounts let you invest money tax-free now and then pay the piper once you make withdrawals in retirement. Meanwhile, Roth IRAs and Roth 401k's tax you now and make the withdrawals tax-free.

You'll probably want to discuss with a financial adviser the best option for your particular situation, but generally, Roth accounts are preferable for younger investors. In theory, you should be making more when you're 65 than when you're 25. As a result, your tax rate now may be lower than the rate you'd pay at retirement. However, if you're within a few years of retirement, you may want to consider a traditional account to get the tax benefits now.

Rule 6: Take a little risk

You could put all your money in bonds and sleep well at night knowing you'll probably never lose any of your money. But with that approach, you're not going to retire a millionaire either.

Stocks and real estate are where the money is to be made, but then there is always the risk of a housing bubble bursting or the market crashing. Take heart, though, in knowing that stocks and real estate have historically appreciated in the long run.

Rule 7: Stay informed about your investments

Don't mistake taking a risk with being dumb.

A smart risk may be investing in an emerging market fund. A dumb move may be pouring your life savings into a speculative currency.

How do you know the difference? By researching available investments, weighing your options and selecting the amount of risk that works for your unique situation. For example, those nearing retirement age may want to minimize their level of risk, while recent college grads can be more daring because time is on their side.

Rule 8: Break free from the herd

When the stock market crashed a few years ago, too many people freaked out and sold their investments.

You know what? Those people took a bad situation and made it even worse. Many sold their investments right when the market was bottoming out and then they missed the rebound.

The people who are going to retire rich are those who snatched up stocks at bargain-basement prices in 2009 and then saw their value climb by double digits in the following years. Same thing goes with the housing market. When the bubble burst, the smart people were the ones who were buying houses, not selling.

It's easy to follow the herd, but if you want to be rich, you need to keep a cool head and make rational money decisions even in the midst of a crisis.

Rule 9: Work longer

Or at least wait to file for Social Security. While you can file for Social Security benefits as early as age 62, you'll get a lot more money if you wait until you're 70.

Once you hit your full retirement age, you can get an 8 percent bump in your benefits for every year you wait to start receiving payments. However, you'll want to file by age 70 because there is no benefit to waiting longer than that.

You may be worried you'll have one foot in the grave at age 70, but don't fret. According to Social Security actuarial data, at age 70, you should still have an average of 14 to 16 years left to suck all the marrow out of life.

Rule 10: Maximize your income potential

Finally, if you want to retire rich, you need to maximize your earnings. That means no more settling for a dead-end job that pays pennies.

Look for ways to increase your income, which can, in turn, increase the amount of money you are saving for retirement. Consider these options:

  • Does your current field offer some form of credentialing that could increase your opportunities for a raise or a transfer to a higher-paying position?
  • Is there someone in your workplace who could serve as a mentor and help advance your career?
  • Are you eligible for one of the government-funded workforce development training programs?
  • Did you start a college program and never finish it? Will those credits transfer?
  • Could you use an online degree program or vocational classes through a community college to earn a degree or upgrade your skills?

Regardless of which option you choose, don't fall into the student loan trap. If you do decide to go back to school, look for ways to make college affordable and try to pay as you go rather than going into debt.

Retiring rich may sound like something reserved for the one-percenters, but by making these smart money moves, you too can have plenty of cash to carry you through your golden years.

More on Money Talks News:


Mar 6, 2014 2:10PM
They forgot the most important one - GET OUT OF DEBT!  You don't need that much money coming in every month if you don't have any debt.
Mar 6, 2014 2:21PM
Mar 6, 2014 2:22PM
I've been in financial services since 1994 and I can tell you that Rule #8: following the herd is spot on.  Money evokes emotion in people.  Unfortunately, making investment decisions based on emotions (greed/envy in up markets, fear in down markets) makes people do the exact wrong thing at the exact wrong time.  People will constantly buy high and sell low over and over.  And they typically blame someone else: Obama, Bush, the Fed, Goldman Sachs, whomever.  All you need to do is utilize a disciplined process that takes emotion out of the equation.  Asset allocation, diversification and occasional rebalancing.  Long-term buy and hold.  It will force you to buy low and sell high (even when that feels uncomfortable) and that will lead to financial success over the long-term.  It really is that simple and I've seen people do it at all income levels.
Mar 6, 2014 2:28PM
I think the most important rule is to try live a meager lifestyle. As I've gotten older I try to continue to live like I did when I was young when I didn't make much money and save all the disposable income. There's a healthy balance here between being a pauper and being happy, but it can be done.
Mar 6, 2014 5:32PM
Always always live within your means. Too many people need to have/own the most expesive cars, smart phones, clothes, etc.. In the end, all that "stuff" won't make a difference when you are trying to live off of your savings. Imagin driving a car costing $35K instead of $65K?  Invest that $30K.  When going to the Verizon/AT&T/T-Mobil store, forget the latest smart phone that will set you back $200-$300.  Get whatever smart phone they have that meets your needs that is at no cost. I know, they won't have the same snooty effect, but who cares when its more money in your pocket.
Mar 6, 2014 4:54PM
Really? And here I have been lead to believe that being 'rich' was bad!! So MSN is posting articles on how to build wealth? Why? So that the ones that do follow all the rules listed in this article can then have it taken away, made to feel that they didn't earn it, that they don't deserve it, and our wealth needs to be redistributed??? Pick a side MSN!!!!
Mar 6, 2014 2:24PM
Same recycled articles, time and time again...
Mar 6, 2014 2:15PM
Spend less than you earn? Gee, what a revelation. Why didn't I think of that before reading this? Next thing you know the author will be sharing such pearls of wisdom that a high paying job is better than a low paying job if you want to retire rich.
Mar 6, 2014 5:39PM
DO NOT WAIT TILL 70 for SS benefits.  That is BS.  If you start collecting at age 62-65, it will take 14-18  yrs for you to catch up is you wait till 70.  Collect while you can.  As you get older you will also no spend as much on activities.  But use your own calculator to figure it out as to whether is it sworth it or not.

Mar 6, 2014 6:51PM
A common sense article.  The obvious is stated once again.  Well my wife and I applied these simple principals.  I worked with my hands and back for 40 years in the construction trades and carried a lunch pail.  I retired at 59 and my assets are still growing.  A paycheck can earn you a living but to accumulate wealth you need to invest what cash you have.  My way was mostly during Clinton's presidency.  I was into mutual funds.  I spent a lot of energy researching data and tried to make good choices.  I washed dishes in high school to earn money as my mother was left broke when my father left us.  I had no free lunch.  In retirement we travel a good amount and we have more income than we had when working (50% more).
Mar 6, 2014 3:02PM

Rule 11.   save or invest 1/3 of your take home pay.

I am 65 and looking back at my SS statement that lists  income for every year- I now have more than the total I have earned in 45 years. Therefore I saved every penny and more.

Mar 6, 2014 5:41PM
It's like going on a life long money diet. Spend less, stay out of debt and save as much as you can. My mom and dad did and they were tight wads which paid off in the end. They lived pretty well after my dad retired after 35 years with U.S. Steel in 1986. He invested his money into stocks and mutual finds and came out smelling like a rose. But, that all happened long before the big melt down in 2008. He passed away in 2005 leaving mom doing quiet well.
Mar 7, 2014 12:29AM

Could you please define "rich" (that is what I was hoping for from this article). The term "rich" is speculative. For some "rich" might mean having a net worth of $100,000 but to others it may mean having a net worth $1,000,000 or more.


The focus of most studies seems to be leaned toward the bottom half or bottom one third of the retirees with dismal savings. I guess that this is so they can justify taking my money to make them more comfortable (democrat's).


I have worked, I have saved, I have invested over a life time for my future and no one or no Government should take that away from me and give it to somebody else because they did not plan or apply themselves.


As a note: I volunteer for Tax Aide assistance for the elderly and low income individuals and I understand their plight. But that does not change my position of my personal circumstance (I earned my share and should not be required to give it away, period).

Mar 6, 2014 4:14PM
This article must be intended for those who aren't "the sharpest tool in the shed".   If someone didn't already know these common sense tips, they will never be rich because they are too stupid to understand what it takes to get there.
Mar 6, 2014 2:07PM
Rule # 1 for retiring rich, be rich.
Mar 6, 2014 1:16PM
Moving forward for most Folks, investing in Your Health is the number 1 Golden Rule since Medicare won't be there in the Future and because of rising Cost to get proper Care, most won't be able to afford getting cared for.
Mar 6, 2014 6:06PM
Luckily we don't have to worry about inflation.  Well, at least that's what the Fed would leave you to believe as they continue to beat down the dollar. 
Mar 6, 2014 8:07PM
"Rich" is definitely in the eye of the beholder :-).
We practiced all these tips except for #9 (and we got out of debt years ago).  These are common sense, simplistic tips but they work. 

Mar 6, 2014 9:43PM
Mar 15, 2014 7:24PM
First they tell us to max out our 401(k) accounts. Now, BECAUSE we have maxed out our 401(k) accounts, the income from future withdrawals will count as "too much non-SS income" and thus cause our Social Security payments to be taxed to death.

We really can't win for losing!
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