If you’re nearing retirement, you might check your accounts to see if you have enough money to last you through your senior years.
These numbers can be a tough reality check, but don’t beat yourself up if you’re ill-prepared for the days ahead. If you’re not hitting your retirement goals, or think you need more than you planned, here are some strategies and tips to help you grow your savings and get closer to the million-dollar mark.
Retiring a millionaire may not be impossible if you’re over 50, but it takes a lot of work. You’ll have to think about saving more, extending your retirement timeline, and taking advantage of all the accounts that will get you there. Be willing to crunch numbers and unlock your possibilities. If you’re ready to be consistent, have a master plan, and invest in your growth, your millionaire retirement goals are within reach.
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start with numbers
Before you dive into your master plan, it’s important to calculate how much you need so you can work strategically toward your goals. Here are some numbers to get started:
- What is the ultimate goal? What number do you want to call? You may need more or less than a million to maintain your lifestyle.
- How old are you and how much time do you have to achieve your goals? If you delay your retirement date, you’ll give your investment more time to grow.
- What tools will you use to achieve your goals and how much can you contribute to each account? We can view employer-sponsored retirement accounts, IRAs, and taxable brokerage accounts.
Getting the Most Out of Your Workplace Retirement Plan
Once you reach age 50, you can save more money in an employer retirement plan, such as a 401(k), 403(b), or the Thrift Savings Plan (TSP) for federal workers. In 2022, you can contribute up to $27,000 to these accounts. Take a look at your finances and determine how much you can easily contribute each year. The more you contribute, the better your chances of reaching a million dollars in retirement. You also get tax benefits when you save in these accounts.
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Let’s say you’re 52 and contribute about $27,000 per year to your 401(k) for the next 17 years. You’ll have more than $450,000 invested in assets such as index funds or actively managed mutual funds.
Your ROI will determine how fast your money grows. While the stock market delivers a 10% annual return over the long term, if the market underperforms over the next 10 years, you can aim for a 5% to 7% annual return.
If you save about $2,220 a month and plan an average annual ROI of 6%, you can accumulate over $775,000 in your 401(k). Play around with contribution amounts, annual returns, and retirement time to see how much you can fight for in your 401(k). Remember, your employer-sponsored retirement account is just one tool you can use to achieve your financial goals.
Open IRA
An Individual Retirement Account (IRA) is a great companion to add to your retirement portfolio. You can choose between a traditional or Roth IRA. It all depends on when you want to pay taxes and your income for the year.
Let’s say you contributed up to $7,000 to your Roth IRA in 2022. Over the same time frame, you could accumulate over $250,000 in a Roth IRA if you contribute up to $7,000 per year and earn an average annual ROI of 9%.
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If you’re proficient in asset classes other than the stock market, a self-directed Roth IRA may get you closer to your investment returns. You can use your self-directed IRA to invest in real estate, startups, and other exotic assets.
One of the most attractive features of a Roth IRA is the tax-free benefit. With the strategies above, you may have $250,000 in tax-free funds to add to your retirement portfolio.
Save on taxable brokerage accounts
If you want to relieve the pressure of saving a lot of money each year in an employer-sponsored retirement plan, you can open a taxable brokerage account. There is no limit to how much you can contribute, and you have more flexibility to invest in individual stocks. If you’re willing to do your research and tap into high-potential investment opportunities, you’re likely to get better returns. On the other hand, you may not enjoy all the tax benefits that come with investing in employer-sponsored plans and IRAs.
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