How to Save a Million Dollars for Retirement
Having worked hard for so many years you certainly are worthy of enjoying a comfortable retired life. And for leading a comfortable life you need money and one approach to that is to keep saving while still working. If you invest your savings smartly, you can save substantial amount for a comfortable retired life. But you have to set your goal early in life. That would call for a reasonably good budget for living and invest your savings. Here are tips on how to save a million dollars for retirement.
- Keep away from spending money on items of luxury and don’t spend more than what you can afford. Plan your expenses and stick to them. Quite often one is tempted to buy items because of the modern marketing techniques employed by companies, don’t get carried away. For instance you may be encouraged to buy an expensive car and you may already have funds for that, but remember, you could save and invest that money to your kitty of saving 1 million dollars for retirement.
- Another very helpful tip on how to save a million dollars for retirement is to open a 401k account, if you don’t have one already and keep making your contributions to that regularly. Include the contribution from your employer in this account, enabling the account grow faster. Though funds in your 401k would only form a part of your targeted figure of saving 1 million dollars for retirement, it is required because of the tax benefits it provides. All your dividends in 401k are exempted from tax. Of course you pay tax but only when you withdraw funds from this account.
- Look for financial and investment advising companies charging lower fees for managing your portfolio. You can well understand on choosing firm charging 2-3% annually, you’ll end up paying a good part of your savings as fees. You may like trying managing portfolio on your own, seeking help from online sources or looking for low-fee trading options offered by discount brokerage firms.
- Do not delay making payment against your credit card and pay your debts in minimum possible time. On paying interest on unsecured/secured loans, you are reducing your likely profits from your investments. Let’s say you had $1,000 as debt against credit card, carrying an annual charge of ten percent, and an investment of the same $1, 000, giving a return of six percent/annum. That means you would lose cumulative interest from your investment to paying your credit card debt. Such like factors make it difficult saving 1 million dollars for retirement.
- Invest in mutual funds and stocks, keeping long term growth in mind. Making quick money is not everybody’s cup of tea. Seek opinion of financial advisor and choose investments carrying lower risk. It’s imperative to reinvest your earning and refuse to along with your wishes of spending returns from investments.
Have a savings account and use its fund for emergencies only. Do not use funds from this account unless you face very grim circumstances. Apart from working as a cover for any unforeseen financial emergency, the funds in this account also keep earning interest for you. Fix a definite amount to be deposited in this account and make deposits regularly.