Yes, that’s right you can save a million for retirement and spend your golden years in comfort. A million might not have the same purchasing power as it has today, however you will be able to spend your retirement without fear of poverty or working long into old age.
Start Saving Early
The earlier you start saving the easier it will be to retire at the current retirement age of 66 years old with one million in savings.
If you were to start saving just 200 dollars a month with an interest rate of 8% and inflation at 3% you would be able to retire a millionaire at 66 years old. (Check out our Millionaire Retirement Savings Calculator below)
It is reported that millennials are neither saving the right amount or early enough to be able to retire comfortably.
A study conducted in 2018 by Aon confirms this with shocking statistics that show that only 1 in 3 workers will have saved enough money to retire comfortably at 67 years old.
So, if you’re in your early 20s and have not yet thought much about your savings or retirement, now is the time to do so. A little saved now will go a long way in the years to come.
Learn to Live on Less
Learning to live on less is one of the key principles of saving. This does not mean you have to decrease your quality of life, however making just a few small changes will make a big difference in your ability to put enough away each month to retire a millionaire.
We live in age of consumerism that is beyond what previous generations experienced and is undoubtedly a key factor in the inability of millennials to save as much as needed to retire comfortably.
Cutting down of eating out, cable bills, online subscriptions and any other personal money traps that we might find ourselves in can help save an extra 100-200 dollars minimum each month.
Benefit from Compound Interest
Most of us experience compound interest as a negative, think mortgages and what you pay to the bank in interest before you even make a dent on the payment of the property itself.
You can however make compound interest work for you by investing in mutual funds and the stock market to grow your savings. With the S&P 500 index, stocks return on average approximately 10% annually over the course of a lifetime.
However, with inflation averaging around 3% annually this translates into something closer to 7%. This is still considerably more than anything you’re likely to find in a traditional bank savings account.
The best option when it comes to exposure to the stock market is often through your 401k, pension fund and lifetime ISA in the UK.
Investing in the stock market can be extremely profitable, but timing is everything so investing for the long-term is perhaps the best strategy for riding the ups and downs. Be sure to always seek expert opinion from qualified and experienced financial advisors when investing your savings in the stock market.
Consider investing in Gold
Consider the possibility of investing a percentage of your savings in gold. See my previous post for a more in depth explanation of gold investment as a hedge against both inflation and the stock market.
Commit to Saving
Committing to saving as a lifetime habit is key to the success of the saving a million method. Brian Tracy in his book ‘The 21 Success Secrets of Self-Made Millionaires’ calls this paying yourself first.
For example, each month when you receive your pay check immediately put aside 10% into your savings and investments account. In doing so you are paying yourself first.
Learning to live on that 90% of your salary can be a challenge in the beginning however it should be that little be easier if you have successfully implemented the previous principle of learning to live on less. Cutting back on a few unnecessary and perhaps even wasteful expenses will make a huge difference.
Committing to saving brings with it a key life skill by developing your money management skills, which can have benefits for you beyond your personal finances.
The sense of achievement and confidence you get each month knowing you are on way to becoming a millionaire is something the consumer culture today can’t give you!
It’s never too late
The reality is most of us do not start thinking about retirement and what are nest egg is going to look like until well into our late 20s, 30s and beyond. Ideally starting to save earlier would be great however it is still very possible to save enough to retire comfortably at any age. The key is start today!
If you’re 35 and getting a yearly return of 7% after inflation on your savings you will need to save around 420 dollars a month to retire a millionaire at 66 years old, which is still very achievable.
If saving 420 dollars a month seems totally unachievable to you right now even with a more frugal lifestyle, why not consider a second source of income.
This can be anything from getting a weekend job or investing in a new skill or education that can help you get a pay rise. You could also use these new skills to do something such as offering a service or product you can sell to make a few extra dollars each month. Online side hustles are an excellent way to get some extra money to save each month without even leaving the comfort of your own home.
“If you cannot save money, the seeds of greatness are not in you.”
These are the words of warning and inspiration from the late W. Clement Stone who is an example to all who wish to better their financial situation both now and into retirement.
Check out our handy Millionaire Retirement Savings Calculator below which will show you exactly what you need to save to become a millionaire. There are also a few useful functions such as a savings schedule and charts that I hope will be of benefit to you on your journey to financial security.