We all have a goal of reaching our golden years with enough money in the bank to make it through. The problem is, we don’t know how much money we’ll need. Life is unpredictable. We could live another 40 years after retirement as modern and future medicine works to extend our life expectancy.
The best plan is to have at least a million dollars saved up by the time you’re ready to retire. A person can make it quite a while on that chunk of change. Not to mention the interest that will grow as you get older over the time that you’re saving up. Here are seven rules that will help you save $1 million by the time you retire.
Rule #1: You Must Make Saving a Priority
If you truly want to save $1 million, you can’t be a spender. This is the number one rule for a reason. You need to develop the mindset of saving as much money as possible. You can start saving at 23 and it will take you saving $400 per month, every month, to accomplish this goal. That takes having a lot of discipline!
Rule #2: Start as Early as You Can
The earlier you start your saving process, the much better the odds you’ll make it. The later you start, the more you’ll have to save each month to get there. Or you’d have to do some type of Wall Street investing into the right stocks. Still, the clearest and safest picture is investing early, especially so you can take advantage of compound interest on your savings.
Rule #3: Look at the Different Retirement Plans
Your employer might have a retirement plan they’re willing to help invest in. For example, 401(k) plans are to help you reach your retirement goals. Many employers match your own investment. By taking full advantage, you should consider putting in as much as your employer will allow you. Every dollar you invest is literally free money when they contribute the same.
If your employer doesn’t do a 401(k), then look IRAs. There are a lot of ways to help grow your retirement funds. Look at all of your options. Maybe choose a company that offers the right incentives so you’re in a much better place when it’s time to retire.
Rule #4: Keep Your Hands Off Your Retirement Funds
Something a lot of people try to do is borrow or cash out some of their retirement money. They might be going through a hardship or just need some quick cash. The thing is, it’s a bad idea to take from your retirement. Not only will taxes and fees be added into the equation, you will lose the added benefits you receive with compound interest.
Rule #5: Keep the Amount of Your Debt Low
Listen, if you have a lot of debt, it’s going to be extremely hard to save for your retirement. You most certainly won’t reach your $1 million retirement goal. If you have a lot of debt, you will have to pay interest on that debt and it’s going to sap your monthly salary. Those extra thousands of dollars on interest payments could be going into your retirement fund, but are instead wasted on debt.
The ultimate goal for living a life with financial freedom is to be able to save. You need both a rainy-day fund and a retirement account. That’s the best way to protect yourself and your family against bad times, a changing economy, and any accident that might happen. Be a saver rather than a spending and you’ll do fine.