March 14 is National Pi Day, when math nerds take center stage. There's also no better time to get your finances on track.
Retiring a millionaire is within reach for many investors, even if you're not already wealthy. You don't necessarily need to save a lot each month to reach millionaire status, but you'll need the right strategy.
In honor of Pi Day, there are endless ways to save more for retirement (see what we did there?). And these 3(.14) strategies can put you on the path to becoming a millionaire.
1. Start saving early
When time is on your side, it becomes significantly easier to save a lot of money. For example, say you began saving at age 20 with a goal of reaching $1 million in savings by age 67. If you were earning an 8% annual return on your investments, you'd need to save just under $200 per month to reach your goal. On the other hand, if you waited until age 40 to begin saving, you'd need to sock away around $1,000 per month, all other factors remaining the same.
This doesn't mean that you can't retire a millionaire if you're off to a late start. But it's better to start investing now rather than putting it off. The longer you wait to begin, the more you'll need to save each month to catch up.
2. Save consistently
Saving consistently can help you build a robust retirement fund. When you save a little each month, it's easier to build saving into your budget. You know you're going to invest a certain amount month after month, so saving becomes a priority rather than an afterthought.
In addition, this strategy can make saving easier on your wallet. Saving $100 per month often feels more manageable than saving $1,200 once a year, for example, even though they amount to the same thing. And when it feels easier to save, you're more likely to stick to your plan.
3. Avoid taking retirement account withdrawals
When money is tight and you're faced with an unexpected expense, it may be tempting to pull the cash from your retirement fund. However, even relatively small withdrawals can make it much more challenging to reach your million-dollar goal.
Say, for instance, you have $100,000 saved in your 401(k) and you're earning an 8% annual rate of return on your investments. Let's also say you're considering making a one-time $5,000 withdrawal. Here's how much you'd have saved over time, assuming in either scenario you're not making any additional contributions.
|Number of Years||Total Savings After Taking a $5,000 Withdrawal||Total Savings Without Taking a $5,000 Withdrawal|
In this scenario, that single $5,000 withdrawal could result in more than $50,000 in missed potential earnings. If you were to make repeated withdrawals over the years, you could miss out on even more.
.14. Earn employer-matching contributions
Finally, one way to boost your savings that requires no effort on your part is by earning matching 401(k) contributions. These are essentially free money. You simply save in your 401(k), and your employer will match your savings up to a set amount.
For example, if you're earning $60,000 per year and your employer will match your contributions up to 3% of your salary, that's $1,800 per year from your employer. Try your best to at least contribute enough to your 401(k) to earn the full match. Otherwise, you're leaving money on the table.
You don't need to be rich or a stock market guru to be able to retire wealthy. Warren Buffett once said that, "The most important quality for an investor is temperament, not intellect." With patience and the right strategy, it's easier than you think to retire a millionaire.
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